Publication 971 - Instructions Innocent Spouse Relief Forms - 2003 Page 8
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22Worksheet A. Allocating the Understatement of Tax
(Note: This worksheet is optional. Keep it for your records. Do not
mail it to the IRS.)
(a)
(b)
Your Items
Joint Items
1. Enter the net amount of income and deductions that are (1) taken into account
in computing the understatement of tax and (2) allocated to you or allocated
jointly to you and your spouse. See instructions. . . . . . . . . . . . . . . . . . . . . . . 1.
1.
2. Enter the net amount of all income and deductions taken
into account in computing the understatement of tax.* . . 2.
3. Divide line 1 by line 2. Enter the result as a decimal (rounded to at least 3
places). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
3.
4. Enter the understatement of tax.* . . . . . . . . . . . . . . . . . 4.
5. Enter the credits and other taxes taken into account in
computing the understatement of tax. See instructions.
5.
6. Subtract line 5 from line 4. . . . . . . . . . . . . . . . . . . . . . . . 6.
7. Multiply line 6 by line 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
7.
8. Enter the credits and other taxes that are (1) taken into account in computing
the understatement of tax and (2) allocated to you or allocated jointly to you
and your spouse. See instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
8.
9. Add lines 7 and 8. The total of columns (a) and (b) is the understatement of
tax you are responsible for . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.
9.
Note: Subtract this total from line 4 to get the understatement of tax that
qualifies for relief.
*This should be shown on the IRS notice or audit report.
Line 1, Column (a)
Allocating items subject to different tax rates. You
must use an alternative allocation method if the under-
When allocating income and deductions taken into ac-
statement of tax arises from two or more erroneous items
count in computing the understatement of tax, you gener-
that are subject to tax at different rates. This situation will
ally allocate them in the same manner you would have
occur, for example, if you have ordinary income (such as
allocated them if you and your spouse had filed separate
wages or interest) and capital gains. First separate the
returns. Enter the items allocable to you in column (a).
erroneous items into categories according to their applica-
However, see the instructions for line 1, column (b), later
ble tax rate. Then make a separate allocation for each tax
for items that must be entered in that column instead of in
rate category using a separate Worksheet A for each
column (a).
category.
Income. Allocate wages and salaries to the spouse who
performed the services and received the Form W –2. You
Example. Wendy and Hal filed a joint return for 2000.
generally allocate business or investment income accord-
They divorced in 2001. In August 2002, the IRS audited
ing to which spouse owned the business or investment that
their 2000 return and determined that they owe an addi-
produced the income. This rule also applies to capital
tional $5,100 in income tax. Of this amount, $2,000 is
gains, but see Allocating items subject to different tax rates
attributable to an unreported net capital gain of $10,000
next. If both spouses owned an interest in the business or
that is subject to a 20% tax rate. The remaining $3,100 is
investment, allocate the income in proportion to each
attributable to unreported interest and dividend income of
spouse’s ownership interest. Income from jointly-owned
$10,000 subject to a 31% marginal tax rate. Neither Wendy
property should be allocated equally between you and your
nor Hal had actual knowledge of the other spouse’s erro-
spouse unless there is evidence that shows a different
neous items.
allocation is appropriate. If you knew about the income
A breakdown of erroneous items by tax rates and own-
from jointly-owned property, enter the income in column (b)
to the extent you knew about it.
ership is shown next.
Page 8
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