Tax Court Denies Equitable Innocent Spouse Relief

Posted on January 06, 2015

In a recent Tax Court case, the Court ruled in favor of the IRS and denied the taxpayer’s wife’s claim for equitable innocent spouse relief.

The taxpayer and her ex-husband filed tax returns listing unpaid liability that was not paid when the return was filed. The liability in issue stemmed mainly from the taxpayer husband’s income. Because there was an understatement of tax, the taxpayer’s wife was only eligible to seek equitable innocent spouse relief.

Although the liability in issue stemmed primarily from the taxpayer husband’s income, the taxpayer’s wife regularly made more money than her husband and had substantial assets. The Tax Court looked to the factors set out by the IRS to determine whether it should grant equitable innocent spouse relief, including:

Whether the taxpayer is still married to the non-requesting spouse
Whether the requesting spouse will suffer economic hardship if relief is not granted
Whether the requesting spouse knew or had reason to know that the non-requesting spouse would not or could not pay the tax liability and other factors.

After looking at the factors, the Tax Court held in favor of the IRS and denied equitable spouse relief to the wife.

Before you file a Request for Innocent Spouse Relief (Form 8857), be sure you have carefully reviewed the form and what documents to submit with it. IRS Publication 971, Innocent Spouse Relief, has some additional detailed information if you are planning to file. Or better yet, consider consulting a tax attorney to help you file.

Have you filed a tax return with an ex-spouse that listed unpaid liability?

Have you received an IRS notice telling you that you have unpaid liabilities that you feel belong to your spouse?

Is the IRS examining your tax return and increasing your tax liability due to your spouse?

You may be entitled to equitable innocent spouse relief.

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