Joint filing is a popular income tax filing option for married couples. However, this kind of filing renders both spouses responsible for tax debt and for any irregularities in the tax return - and can provide additional challenges for couples in community property states such as Washington. The potential exists for one spouse to unknowingly become liable for taxes and penalties and vulnerable to other consequences, based on to the other spouse's actions. The Internal Revenue Service provides ways to correct this problem, and people who are not satisfied with an IRS decision have the opportunity to appeal.
Injured spouse
The IRS allows a person to apply for relief as an injured spouse if the person and spouse filed a joint tax return and were due a refund, but all or part of it was instead applied to a legally enforceable debt. Such debts include past-due federal or state income taxes, a federal student loan, child support or spousal maintenance.
If the person's spouse was the one who incurred the past due debt, the person may be an eligible injured spouse. The IRS may repay the portion of the refund that should have been paid to the spouse who did not incur the debt that the refund was withheld to pay.
Innocent spouse
Innocent spouse relief may be available when a couple has jointly filed a tax return that understates the tax liability. For example, the return shows that the filers owe $2,000 in taxes, but they actually owe $3,000. In this situation, there is a $1,000 understatement of tax, for which both of the filers can be held liable. The IRS can pursue collection activity against both of them.
A person must prove to the IRS that it was the spouse who made the errors or misstatements on the tax return that resulted in the understatement of tax.
Other conditions apply. The person filing for innocent spouse relief must not have known, and would have had no reason to know, that there was an understatement of tax when the return was signed. Once the IRS has discovered the understatement and begun its efforts to collect the tax that is due, there is a two-year window to file for innocent spouse status. Finally, after considering the circumstances, the IRS must find that it would be unfair to hold the person liable for understating the tax.
The desirable result of asking the IRS for innocent spouse relief would be that the IRS would hold liable only the spouse who was actually responsible for the tax understatement.
Further options
Besides injured and innocent spouse claims, it is possible to ask the IRS for separation of liability or equitable relief after a joint filing. Either of these options have slightly different requirements, but the IRS bases its decisions on the information that is provided and its application of the law to the facts.
If the IRS does not respond favorably to a claim for relief, the person who filed the claim has the option of appealing the decision. An appeal is not appropriate if the person simply cannot afford to pay a tax or penalty that is due; there must be some good reason why the IRS decision was wrong.
It is very helpful to seek the assistance of an experienced attorney whenever appealing an IRS decision. Because Washington is one of the few community property states in the country, Washington married couples may have extra concerns that an attorney can address.
