There are different rules for innocent spouse relief. There are many questions clients ask us regarding the rules for Separated Liability. Hope this helps.
What are the rules for Separation of Liability?
Under this type of relief, you divide (separate) the understatement of tax (plus interest and penalties) on your joint return between you and your spouse. The understatement of tax allocated to you is generally the amount of income and deductions attributable to your earnings and assets.
To qualify for separate liability, you must have filed a joint return and met either of the following requirements at the time you file Form 8857:
You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. (Under this rule, you are no longer married if you are widowed.)
You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12 month period ending on the date you file Form 8857.
Why would a request for separate liability be denied?
Even if you meet the requirements listed above, a request for separate liability will not be granted in the following situations:
The IRS proves that you and your spouse transferred assets for the main purpose of avoiding payment of tax.
The IRS proves that at the time you signed your joint return, you had actual knowledge that any items giving rise to the deficiency and allocatable to your spouse were incorrectt.
What Factors are considered in determining whether or not to grant equitable relief?
The following factors may be considered, but the list is not all-inclusive:
Current marital status
Abuse experienced during the marriage
Reasonable belief of the requesting spouse, at the time he or she signed the return, that the tax was going to be paid; or in the case of an understatement,whether the requesting spouse had knowledge or reason to know of the understatement
Current financial hardship/inability to pay basic living expenses
Spouses’ legal obligation to pay the tax liability pursuant to a divorce decree or agreement to pay the liability
to whom the liability is attributable
Significant benefit received by the requesting spouse
Mental or physical health of the requesting spouse on the date the requesting spouse signed the return or at the time the requesting spouse requested the relief
Compliance with income tax laws following the taxable year or years to which the request for relief relates