Relief for a Spouse Who Does No Wrong - Innocent Spouse Rule

Sometimes a spouse who acts in good faith finds herself (it is almost always the wife) with a tax liability because of the illegal actions of her former husband. Normally, married couples filing jointly have what is known as joint and several liability, which means that the Internal Revenue Service holds each liable for taxes owed.

Many women, even in the midst of a divorce, will sign what their husbands tell them to sign. Not infrequently, these same women find themselves with tax liabilities when the I.R.S. reviews joint returns.

Section 434(c)(1) of the Internal Revenue Code, which was enacted in 1998, now protects the innocent spouse from tax liabilities when four conditions can be met. They are as follows:

A joint return contained “an understatement in tax due to an erroneous item” related to the former spouse;

> The innocent spouse had “neither actual, nor implied understanding” of the liability when she signed the return:

> Payment of the understated tax and penalties would be unfair to the innocent spouse;

> The innocent spouse elects to apply for relief within two years of the time that the I.R.S. begins collection efforts.

Good legal advice is recommended when a woman finds herself contemplating use of the Innocent Spouse Rule.

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