Publication 971 - Innocent Spouse Relief - Internal Revenue Service (Page 8 of 24) in pdf

Example. Bill and Karen Green filed a joint return show-

year before the date on which the IRS sent its first letter of

proposed deficiency. This presumption will not apply if:

ing Karen’s wages of $50,000 and Bill’s self-employment

income of $10,000. The IRS audited their return and found

•

The transfer was made under a divorce decree, sep-

that Bill did not report $20,000 of self-employment income.

arate maintenance agreement, or a written instru-

The additional income resulted in a $6,000 understated

ment incident to such an agreement, or

tax, plus interest and penalties. After obtaining a legal

•

You establish that the transfer did not have as its

separation from Bill, Karen filed Form 8857 to request

main purpose the avoidance of tax or payment of

separation of liability relief. The IRS proved that Karen

tax.

actually knew about the $20,000 of additional income at

the time she signed the joint return. Bill is liable for all of the

If the presumption does not apply, but the IRS can

understated tax, interest, and penalties because all of it

establish that the purpose of the transfer was the avoid-

was due to his unreported income. Karen is also liable for

ance of tax or payment of tax, the tax liability allocated to

the understated tax, interest, and penalties due to the

you will be increased as explained above.

$20,000 of unreported income because she actually knew

of the item. The IRS can collect the entire $6,000 plus

interest and penalties from either Karen or Bill because

Equitable Relief

they are jointly and individually liable for it.

Factors supporting actual knowledge. The IRS may

If you do not qualify for innocent spouse relief, separation

rely on all facts and circumstances in determining whether

of liability relief, or relief from liability arising from commu-

you actually knew of an erroneous item at the time you

nity property law, you may still be relieved of responsibility

signed the return. The following are examples of factors

for tax, interest, and penalties through equitable relief.

the IRS may use.

Unlike innocent spouse relief or separation of liability

•

Whether you made a deliberate effort to avoid learn-

relief, you can get equitable relief from an understated tax

ing about the item in order to be shielded from liabil-

(defined earlier under

Innocent Spouse

Relief) or an un-

ity.

derpaid tax. An underpaid tax is an amount of tax you

properly reported on your return but you have not paid. For

•

Whether you and your spouse (or former spouse)

example, your joint 2009 return shows that you and your

jointly owned the property that resulted in the errone-

spouse owed $5,000. You paid $2,000 with the return. You

ous item.

have an underpaid tax of $3,000.

Exception for spousal abuse or domestic violence.

Conditions for Getting Equitable

Even if you had actual knowledge, you may still qualify for

Relief

relief if you establish that:

•

You may qualify for equitable relief if you meet all of the

You were the victim of spousal abuse or domestic

violence before signing the return, and

following conditions.

•

Because of that abuse, you did not challenge the

1. You are not eligible for innocent spouse relief, sepa-

treatment of any items on the return because you

ration of liability relief, or relief from liability arising

were afraid your spouse (or former spouse) would

from community property law.

retaliate against you.

2. You have an understated tax or an underpaid tax.

If you establish that you signed your joint return under

3. You did not pay the tax. However, see Refunds,

duress (threat of harm or other form of coercion), then it is

later, for situations in which you are entitled to a

not a joint return, and you are not liable for any tax shown

refund of payments you made.

on that return or any tax deficiency for that return. How-

4. You establish that, taking into account all the facts

ever, you may be required to file a separate return for that

and circumstances, it would be unfair to hold you

tax year. For more information about duress, see the

liable for the understated or underpaid tax. See

Fac-

instructions for Form 8857.

tors for Determining Whether To Grant Equitable Re-

lief, later.

Transfers of Property To Avoid Tax

5. You and your spouse (or former spouse) did not

transfer assets to one another as a part of a fraudu-

If your spouse (or former spouse) transfers property (or the

lent scheme. A fraudulent scheme includes a

right to property) to you for the main purpose of avoiding

scheme to defraud the IRS or another third party,

tax or payment of tax, the tax liability allocated to you will

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

be increased by the fair market value of the property on the

ner.

date of the transfer. The increase may not be more than

the entire amount of the liability. A transfer will be pre-

6. Your spouse (or former spouse) did not transfer

sumed to have as its main purpose the avoidance of tax or

property to you for the main purpose of avoiding tax

payment of tax if the transfer is made after the date that is 1

or the payment of tax. See

Transfers of Property To

Page 8

Publication 971 (September 2011)

Publication 971 - Innocent Spouse Relief - Internal Revenue Service Page 8

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