Form Pa-971 - Relief From Joint Liability (Innocent Spouse Relief) Page 3
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11Indicators of unfairness to hold spouse jointly liable. The
How the Department will calculate separation of liability
Department will consider all of the facts and circum-
relief. If you qualify for separation of liability relief, the
stances of the case in order to determine whether it is
Department generally allocates erroneous items
unfair to hold you jointly responsible for the understate-
between you and your spouse or former spouse by
ment. Two factors the Department will consider are
determining how the erroneous items would have been
whether you:
reported if you were to have filed a separate return.
Relief from joint liability may be granted for the tax
1. Received any significant benefit from the under-
attributable to the items allocated to your spouse or for-
statement of tax; or
mer spouse.
2. Were later divorced from or deserted by your-
spouse.
Unless your spouse also elects separation of liability
relief, he/she will remain liable for the entire understate-
Significant benefit. You can receive a significant benefit
ment of tax. Even if both you and your spouse elect
either directly or indirectly. For example, if your spouse
separation of liability, there may be a portion of the
did not report $10,000 of income on your joint return,
understatement that is not allocable; and as a result,
you can benefit directly if your spouse shared that
both you and your spouse remain jointly and severally
$10,000 with you. You can benefit indirectly from the
liable.
unreported income, if your spouse uses it to pay extraor-
dinary household expenses.
The Department will calculate your separate liability and
figure any related interest and penalties after you file a
You do not have to receive a benefit immediately for it to
complete election packet. You are not required to calcu-
be significant. For example, money your spouse gives
late these amounts.
you several years after he or she received it or amounts
inherited from your spouse (or former spouse) can be a
Burden of proof. You have the burden of proof in estab-
significant benefit.
lishing the basis for separating your liability.
Normal support or support payments that you receive as
Example:
Bill and Karen Green filed a joint return
a result of a divorce proceeding are not a significant
showing Karen’s wages of $50,000 and Bill’s business
benefit.
income of $10,000.
The Department audited their
The Department will calculate the understatement of tax
return and found that Bill did not report $20,000 of busi-
due to erroneous items of your spouse after you file the
ness income. The additional income resulted in a $614
election packet. You are not required to calculate these
understatement of tax, plus interest and penalties. After
amounts.
obtaining a legal separation from Bill, Karen filed the
election packet to request relief by separation of liability.
Separation of Liability Relief (See Flowchart B,
The Department proved that Karen actually knew about
Page 8)
the $20,000 of additional income at the time she signed
You may elect separation of liability relief if you meet one
the joint return. Bill is liable for all of the understate-
of the following conditions at the time you file the
ment of tax, interest, and penalties because all of it was
election packet:
due to his unreported income. Karen is also liable for the
• You are divorced, widowed, or legally separated
understatement of tax, interest, and penalties due to the
from the individual with whom you filed the joint
$20,000 of unreported income because she actually
return.
knew of the item. The Department can collect the entire
deficiency from either Karen or Bill.
• You and the individual with whom you filed the
joint return have not been members of the same
Invalid election A request for relief from joint liability
household at any time during the 12-month period
will not be granted in the following situations:
preceding the date the election packet is filed.
1. The Department proves that you and your spouse
Members of the same household. You and your spouse
transferred assets as part of a fraudulent scheme.
are not members of the same household if you are liv-
2. Your spouse (or former spouse) transferred proper-
ing apart and are estranged. However, you and your
spouse are considered members of the same household
ty to you to avoid tax or the payment of tax. See
under any of the following conditions:
transfers of property to avoid tax below.
3. You had actual knowledge of the erroneous item
1. You and your spouse reside in the same dwelling.
responsible for the understatement of tax.
2. You and your spouse reside in separate dwellings
but are not estranged.
Partial relief when the extent of understatement is
unknown. You may qualify for partial relief if, at the time
3. One spouse is temporarily absent from the other's
you filed your return, you knew or had reason to know,
household.
A spouse is considered temporarily
that there was an understatement of tax due to your
absent from the household if it is reasonable to
spouse’s erroneous items, but you did not know how
assume that the absent spouse will return to the
large the understatement was. You will be relieved of the
household. Examples of temporary absences
include absence due to imprisonment, illness,
understatement to the extent you did not know about it
business, vacation, military service, or education.
and had no reason to know about it.
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