When it comes to tax filing, married couples have the option to choose between filing their taxes jointly or separately. Others might choose the option Married Filing Separately in order to be eligible for tax breaks, examples of which are Earned Income Credit and Deduction of Net Capital Losses.
The fact that many find that filing separately has more disadvantages than advantages means that Married Filing Jointly is the more popular choice for couples. What they might be forgetting is the fact that this leaves them open to Joint and Several Liability. What this means is that both parties are severely and jointly liable for any due tax. This includes penalties and interests.
Innocent Spouse Relief
This applies to situations wherein the couple is divorced or at least legally separated. In this scenario, the innocent party can file for Innocent Spouse Tax relief in cases wherein the former spouse failed to properly file your taxes, either by omitting items on your tax returns or by improperly reporting items in your tax filing.
Filing of the Innocent Spouse Relief can be done once the IRS has given you the alert that you will be assessed jointly along with your spouse due to inconsistencies or erroneous tax filings.
Injured Spouse Relief
Conversely, this type of tax relief is usually done while the couple is still together. To be counted as eligible for this tax relief, you cannot be legally obligated to settle your spouse’s past debts. If you are eligible, you can file for this tax relief if your spouse makes use of your tax refund to settle their tax obligations, tax obligations incurred prior to your marriage.
The IRS normally responds within 14 weeks. This is for situations where the refund was offset or seized but you were able to file an Injured Spouse claim soon after.
Some Differences to Take Note Of
1. Currently Married vs Legally Separated/Divorced
When the couple is currently married, the claim of an Injured Spouse more often than not applies; Alternatively, legally separated or divorced couples should take a look at Innocent Spouse claims.
2. Injured Spouse vs. Innocent Spouse
Innocent Spouse relief is given to parties who can prove that they had no knowledge of the erroneous tax reporting or over/understated tax reports. Injured Spouse Relief, meanwhile, is meant for parties where the tax refund of one party was used by the other on a tax obligation incurred prior to the marriage.
3. Debts that Apply
Innocent Spouse Relief is meant to relieve the filing party of tax obligations that the couple is jointly liable for. Injured Spouse Relief, on the other hand, does not have to apply to IRS-based tax debts.
As you can see, both innocent spouse and injured spouse relief are effective tools for helping deal with a tax liability if your circumstances apply. Knowing which tool to utilize is of the utmost importance. Be sure to keep this article in mind when making decisions regarding this matter so that you can avoid making potentially costly mistakes that will hurt you down the line.
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