Publication 971 (Rev. April 2008) - Innocent Spouse Relief (Page 5 of 23) in pdf

How and When To Request Relief

Erroneous Items

You request relief by filing Form 8857, as discussed ear-

Erroneous items are either of the following.

lier. Fill in Form 8857 according to the instructions.

1. Unreported income. This is any gross income item

For relief from liability arising from community property

received by your spouse (or former spouse) that is

law, you must file Form 8857 no later than 6 months before

not reported.

the expiration of the period of limitations on assessment

(including extensions) against your spouse for the tax year

2. Incorrect deduction, credit, or basis. This is any

improper deduction, credit, or property basis claimed

for which you are requesting relief. However, if the IRS

by your spouse (or former spouse).

begins an examination of your return during that 6-month

period, the latest time for requesting relief is 30 days after

The following are examples of erroneous items.

the examination begins. The period of limitation on assess-

•

The expense for which the deduction is taken was

ment is the amount of time, generally three years, that the

never paid or incurred. For example, your spouse, a

IRS has from the date you filed the return to assess taxes

cash-basis taxpayer, deducted $10,000 of advertis-

that you owe.

ing expenses on Schedule C of your joint Form

1040, but never paid for any advertising.

•

The expense does not qualify as a deductible ex-

Innocent Spouse Relief

pense. For example, your spouse claimed a busi-

ness fee deduction of $10,000 that was for the

By requesting innocent spouse relief, you can be relieved

payment of state fines. Fines are not deductible.

of responsibility for paying tax, interest, and penalties if

•

No factual argument can be made to support the

your spouse (or former spouse) improperly reported items

deductibility of the expense. For example, your

or omitted items on your tax return. Generally, the tax,

spouse claimed $4,000 for security costs related to a

interest, and penalties that qualify for relief can only be

home office, which were actually veterinary and food

collected from your spouse (or former spouse). However,

costs for your family’s two dogs.

you are jointly and individually responsible for any tax,

interest, and penalties that do not qualify for relief. The IRS

can collect these amounts from either you or your spouse

Actual Knowledge or Reason To

(or former spouse).

Know

You must meet all of the following conditions to qualify

for innocent spouse relief.

You knew or had reason to know of an understated tax if:

1. You filed a joint return.

•

You actually knew of the understated tax, or

2. There is an understated tax on the return that is due

•

A reasonable person in similar circumstances would

to erroneous items (defined later) of your spouse (or

have known of the understated tax.

former spouse).

3. You can show that when you signed the joint return

Actual knowledge. If you actually knew about an errone-

you did not know, and had no reason to know, that

ous item that belongs to your spouse (or former spouse),

the understated tax existed (or the extent to which

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

the understated tax existed). See Actual Knowledge

understated tax due to that item. You and your spouse (or

or Reason To Know, later.

former spouse) remain jointly liable for that part of the

understated tax. For information about the criteria for de-

4. Taking into account all the facts and circumstances,

termining whether you actually knew about an erroneous

it would be unfair to hold you liable for the under-

item, see Actual Knowledge later under Separation of

stated tax. See Indications of Unfairness for Innocent

Liability Relief.

Spouse Relief, later.

A request for innocent spouse relief will not be granted if

Reason to know. If you had reason to know about an

erroneous item that belongs to your spouse (or former

the IRS proves that you and your spouse (or former

spouse), the relief discussed here does not apply to any

spouse) transferred property to one another as part of a

part of the understated tax due to that item. You and your

fraudulent scheme. A fraudulent scheme includes a

spouse (or former spouse) remain jointly liable for that part

scheme to defraud the IRS or another third party, such as a

of the understated tax.

creditor, ex-spouse, or business partner.

The IRS will consider all facts and circumstances in

determining whether you had reason to know of an under-

Understated Tax

stated tax due to an erroneous item. The facts and circum-

stances include:

You have an understated tax if the IRS determined that

•

your total tax should be more than the amount that was

The nature of the erroneous item and the amount of

actually shown on your return.

the erroneous item relative to other items.

Publication 971 (April 2008)

Page 5

Publication 971 (Rev. April 2008) - Innocent Spouse Relief Page 5

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