Posted By: Jennifer O'Neill // Dec 8, 2015
The innocent spouse defense can be one of the most challenging defenses that you can use these days. When choosing to use the innocent spouse defense remember that there are three different types of defenses that fall under innocent spouse and make sure you pick the defense that best meets your case.
a.A joint return was filed and there is an understatement of tax due to erroneous items by the spouse or former spouse
b.The party claiming the relief did not know, or have reason to know, at the time of signing the tax return, of the understatement of tax.
c.Taking into account all facts and circumstances, it would be unfair to hold your client liable for the understatement.You need to show that your client had no idea as to what was happening in regard to the disputed items or was financially so uneducated that they never could have understood the tax understatement and how it came about.
2.Relief by Separation of Liability
a.Need to show that there was a joint tax return filed and there is an understatement of tax.
b.Your client is either no longer married to or is separated from the spouse or both parties are no longer residing in the same household and are estranged.
c.Relief will not be granted if the IRS can prove the spouse transferred assets as part of a scheme to defraud IRS or creditors, and the party seeking relief knew of this transfer.
a.Requesting party must not be eligible for innocent spouse relief, relief by separation of liability, or relief from community property law.
b.Need to prepare written statement for your client
c.This is when your client files a tax return and has a balance due and underpays that balance.