“Innocent-Spouse Rule” May Protect You If Your Spouse Cheated on Your Taxes

"Innocent-Spouse Rule" May Protect You If Your Spouse Cheated on Your Taxes

Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC


When you pick up your mail and see an envelope from the IRS, you know this won’t be a good day. After all, why would the IRS be sending you a letter? To give you a bigger refund?

Not likely.

You know that IRS wants you to pay more taxes – wants you to pay penalties and interest – or wants you to come in for the dreaded audit. Why? Did you do something wrong?

Maybe not. But maybe your spouse did. He or she might have taken deductions you weren’t entitled to. Or failed to report all of your income.

Whatever it was, you didn’t know anything about it so why should you have to pay? Thanks to Congress, maybe you don’t. Congress passed a law called the “Innocent-Spouse Rule”.

This rule says that if you’re eligible, you can avoid paying your spouse’s tax if it was not reported correctly. This rule applies if you can prove that the tax bill was not yours and that you did not benefit by failing to pay the tax.

This rule is intended to protect people from tax liability due to their spouse’s dishonest reporting. Or from divorcing spouses where one does not pay tax on his or her income and intends to stick the other spouse with the bill.

In IRS Notice 2011-70, the IRS will now consider applications for relief under the innocent-spouse rule for up to ten years, the same period of time IRS has to collect the taxes. If you are claiming a refund, then the time period affecting refunds would apply, generally three years.

IRS requires that you meet all of the following conditions for Innocent-Spouse Relief:
— You must have filed a joint return that understates your tax liability;
— The understatement of your tax liability must be due to your spouse’s mistake or fraudulent reporting of income. Or your spouse must have taken a deduction that you were not entitled to take;
— You must establish that at the time you signed the joint return, you did not know, and had no reason to know, that your tax was understated; and
— It would be unfair to hold you liable for the understatement of tax.

You can see that this IRS rule has specific requirements you must meet. No question, it can be confusing. In addition, because of the different deadlines for various types of relief, I encourage you to contact an experienced attorney or CPA to help you determine whether you qualify.