Publication 971 - Innocent Spouse Relief - Internal Revenue Service (Page 7 of 24) in pdf

Example. You receive money from your spouse that is

Limitations on Relief

beyond normal support. The money can be traced to your

spouse’s lottery winnings that were not reported on your

Even if you meet the requirements discussed previously,

joint return. You will be considered to have received a

separation of liability relief will not be granted in the follow-

significant benefit from that income. This is true even if

ing situations.

your spouse gives you the money several years after he or

•

The IRS proves that you and your spouse (or former

she received it.

spouse) transferred assets to one another as part of

a fraudulent scheme. A fraudulent scheme includes

a scheme to defraud the IRS or another third party,

Separation of Liability Relief

such as a creditor, former spouse, or business part-

ner.

Under this type of relief, the understated tax (plus interest

•

The IRS proves that at the time you signed your joint

and penalties) on your joint return is allocated between you

return, you had actual knowledge (explained below)

and your spouse (or former spouse). The understated tax

of any erroneous items giving rise to the deficiency

allocated to you is generally the amount you are responsi-

that were allocable to your spouse (or former

ble for.

spouse). For the definition of erroneous items, see

This type of relief is available only for unpaid liabilities

Erroneous Items

earlier under Innocent Spouse Re-

resulting from the understated tax. Refunds are not al-

lief.

lowed.

•

Your spouse (or former spouse) transferred property

To request separation of liability relief, you must have

to you to avoid tax or the payment of tax. See

Trans-

filed a joint return and meet either of the following require-

fers of Property To Avoid

Tax, later.

ments at the time you file Form 8857.

•

You are no longer married to, or are legally sepa-

Actual Knowledge

rated from, the spouse with whom you filed the joint

return for which you are requesting relief. (Under this

The relief discussed here does not apply to any part of the

rule, you are no longer married if you are widowed.)

understated tax due to your spouse’s (or former spouse’s)

•

You were not a member of the same household

erroneous items of which you had actual knowledge. You

(explained below) as the spouse with whom you filed

and your spouse (or former spouse) remain jointly and

the joint return at any time during the 12-month per-

severally liable for this part of the understated tax.

iod ending on the date you file Form 8857.

If you had actual knowledge of only a portion of an

erroneous item, the IRS will not grant relief for that portion

of the item.

Members of the same household. You and your spouse

You had actual knowledge of an erroneous item if:

are not members of the same household if you are living

apart and are estranged. However, you and your spouse

•

You knew that an item of unreported income was

are considered members of the same household if any of

received. (This rule applies whether or not there was

the following conditions are met.

a receipt of cash.)

•

1. You and your spouse reside in the same dwelling.

You knew of the facts that made an incorrect deduc-

tion or credit unallowable.

2. You and your spouse reside in separate dwellings

•

but are not estranged, and one of you is temporarily

For a false or inflated deduction, you knew that the

absent from the other’s household as explained in (3)

expense was not incurred, or not incurred to the

below.

extent shown on the tax return.

3. Either spouse is temporarily absent from the house-

Knowledge of the source of an erroneous item is not

hold and it is reasonable to assume that the absent

sufficient to establish actual knowledge. Also, your actual

spouse will return to the household, and the house-

knowledge may not be inferred when you merely had a

hold or a substantially equivalent household is main-

reason to know of the erroneous item. Similarly, the IRS

tained in anticipation of the absent spouse’s return.

does not have to establish that you knew of the source of

Examples of temporary absences include absence

an erroneous item in order to establish that you had actual

due to imprisonment, illness, business, vacation, mili-

knowledge of the item itself.

tary service, or education.

Your actual knowledge of the proper tax treatment of an

erroneous item is not relevant for purposes of demonstrat-

Burden of proof. You must be able to prove that you

ing that you had actual knowledge of that item. Neither is

meet all of the requirements for separation of liability relief

your actual knowledge of how the erroneous item was

(except actual knowledge) and that you did not transfer

treated on the tax return. For example, if you knew that

property to avoid tax (discussed later). You must also

your spouse received dividend income, relief is not avail-

establish the basis for allocating the erroneous items.

able for that income even if you did not know it was taxable.

Publication 971 (September 2011)

Page 7

Publication 971 - Innocent Spouse Relief - Internal Revenue Service Page 7

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