Important IRS Terms, Rules, and Code

Inno­cent Spouse Rule — (for­mal­ly under 26 USCS §6013(e)) — A hard­ship pre­ven­tion mea­sure when one spouse (the non-inno­cent spouse) does­n’t report income, there­by leav­ing the remain­ing “inno­cent spouse” to pay defi­cien­cies. Gen­er­al­ly, when mar­ried cou­ples file a joint tax return, they share joint and sev­er­al (they both owe the full amount, inde­pen­dent­ly and togeth­er both) lia­bil­i­ty for the tax owed under IRS Code §6013(d)(s), how­ev­er, under §6015©, eli­gi­ble indi­vid­u­als are not liable for unpaid tax­es to extent that they are attrib­ut­able to income earned by, or deduc­tions improp­er­ly tak­en by, the oth­er spouse IF:

At time elec­tion is filed, the indi­vid­ual is no longer mar­ried to, or is legal­ly sep­a­rat­ed from (and they are no longer house­hold mem­bers with each oth­er), with the for­mer spouse the “inno­cent spouse” the tax return was filed joint­ly with at any time dur­ing the 12-month peri­od end­ing on date such elec­tion was filed.

The key cri­te­ria and log­ic employed with the IRS in mak­ing a deci­sion is IF it would be inequitable to hold inno­cent spouse liable for tax AND whether the spouse sig­nif­i­cant­ly ben­e­fit­ted from items omit­ted from gross income. In the absence of mate­r­i­al evi­dence that lifestyle did not sig­nif­i­cant­ly change, THEN it is inequitable to hold spouse liable for defi­cien­cies. 26 U.S.C.S. § 6013 

Addi­tion­al­ly, the inno­cent spouse must demon­strate they had no rea­son­ably rea­son to know of an omis­sion of income from the joint return they signed, they are a rea­son­ably pru­dent tax­pay­er (can’t pur­pose­ful­ly not know the facts/truth). Gen­er­al­ly, must have min­i­mal or no involve­ment in fam­i­ly’s finan­cial affairs to sat­is­fy “no rea­son­ably rea­son to know” require­ment. 

• A tax­pay­er can not qual­i­fy for inno­cent spouse pro­tec­tion in any giv­en tax year the tax­pay­er did not file a joint tax return.
• An inno­cent spouse does not allow a tax­pay­er to reopen a tax year pre­vi­ous­ly closed by a clos­ing agree­ment exe­cut­ed.
• Unpaid tax­es for tax­es report­ed (albeit not paid), even if not earned by tax­pay­er are not eli­gi­ble for relief under this code (ie the IRS is sim­ply try­ing to col­lect tax report­ed and owed, how­ev­er, not paid).
• Com­mu­ni­ty prop­er­ty laws are gen­er­al­ly dis­re­gard­ed for pur­pos­es of deter­min­ing spouse to who obtained gross income, oth­er than income from prop­er­ty, are attrib­ut­able: sham loss­es claimed on joint return which are entire­ly attrib­ut­able to one spouse will not be imput­ed to inno­cent spouse by only virtue of state com­mu­ni­ty prop­er­ty statutes where inno­cent spouse is not involved in trans­ac­tion cre­at­ing fraudulent/sham loss­es.
• A tax­pay­er may qual­i­fy for some relief, albeit not to all of the tax owed. There­fore, it is not an all-or-noth­ing test
• Sim­ple igno­rance of tax law, includ­ing the tax con­se­quences of trans­ac­tions and/or tax­able events is not enough of an argu­ment to qual­i­fy.
• If tax­pay­er spouse knows of oth­er spouse’s ille­gal income (for exam­ple oth­er spouse steals or embez­zles mon­ey in the tax year in ques­tion) dur­ing the tax year or pri­or to fil­ing, sim­ply not know­ing the income is tax­able is not a viable argu­ment
• Even when ‘inno­cent tax­pay­er spouse’ does not know of tax­able income, albeit is able to live a high­er lifestyle con­sis­tent with the unknown income, gen­er­al­ly, no relief will be grant­ed.