Relief from Joint and Several Liability

November 15, 2019

By Andal Iyengar

When a married couple files a joint return, they are subject to joint and several liability for any tax, interest and penalties as shown on the return and any additional tax liability the IRS determines is due. Thus, both spouses on a married filing jointly return are generally held responsible for all the tax due, even if one spouse earned all of the income or claimed improper deductions or credits. This is also true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns. In some cases, however, a spouse can get relief from being jointly and severally liable.

Relief from joint and several liability may be available under Internal Revenue Code (IRC) Section 6015. Three forms of relief are available:

1. Innocent Spouse Relief: IRC Section 6015(b)

If one spouse fraudulently or falsely reports information to the IRS, innocent spouse relief allows a taxpayer to avoid a tax obligation: tax, interest and penalties arising from erroneous items reported by a spouse, or former spouse, on a joint return. Erroneous items include failing to report income and claiming incorrect deductions and credits.

All of the following conditions must be met to qualify for innocent spouse relief:

  • A joint return was filed that has an understated tax due to erroneous items. Understated tax is generally defined as the difference between the total amount of tax that should have been shown on the return and the amount of tax that was actually shown on the return.
  • At the time the tax return was signed, the spouse claiming the relief did not know and had no reason to know that there was an understated tax.
  • No transfer of assets has occurred between the taxpayer (innocent spouse) and offending spouse, or former spouse, as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, including, but not limited to, creditors, ex-spouses, and business partners.
  • Given all the facts and circumstances, it would be unfair to be held liable for the understated tax.

This type of relief is not available for unpaid taxes, and refunds are allowed.

2. Relief By Separation of Liability: IRC Section 6015(c)

A taxpayer may elect allocation of the understated tax, interest and penalties on the joint return between the taxpayer and the spouse, or former spouse. The following marital status must be met prior to the election to qualify for relief by separation of liability: The couple must be divorced, legally separated or widowed, or not living together in the same house for a 12-month period before filing for relief.

The following conditions must also to be met:

  • No transfer of assets has occurred between the taxpayer and spouse, or former spouse, as part of a fraudulent scheme.
  • At the time the taxpayer signed the joint return, there was no knowledge of any items giving rise to the deficiency that is allocable to the spouse, or former spouse. Reason to know, as is stipulated for innocent spouse relief, is not included in this relief provision.

This type of relief is not available for unpaid taxes, and refunds are not allowed.

3. Equitable Relief: IRC Section 6015(f)

If a taxpayer does not qualify for innocent spouse relief or relief by separation of liability, equitable relief is an option if the following conditions are met:

  • A joint return was filed.
  • No transfer of assets has occurred between the taxpayer and spouse, or former spouse, as part of a fraudulent scheme.
  • The taxpayer did not file the tax return with the intent to commit fraud.
  • Given all the facts and circumstances, it would be unfair to be held liable for the understated of tax or unpaid taxes.

Relief is available either for an understated tax or unpaid taxes, and refunds are allowed.

Taxpayers must request innocent spouse relief or separation of liability relief no later than two years after the date the IRS first attempted to collect the tax. For equitable relief, taxpayers must request relief during the period of time the IRS can collect the tax. If taxpayers are looking for a refund of tax paid, then they must request it within the statutory period for seeking a refund, which is generally three years after the date the return is filed or two years following the payment of the tax, whichever is later.

When a taxpayer requests relief from the joint and several liability of a joint return, the IRS is required to notify the spouse with whom the taxpayer filed jointly and allow him or her to provide information for consideration regarding the claim.

Community Property States

If a taxpayer lived in a community property state and didn't file as married filing jointly, they might qualify for relief from the operation of state community property law. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Refer to Publication 971 for more details.

About Andal K. Iyengar

Andal Iyengar is a Senior Manager in the Private Business Services Group with public accounting experience and advisory services for privately held businesses and individuals including income tax compliance, accounting and financial statement preparation.

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