Newlyweds are typically the recipients of well wishes and presents from friends and family alike. Although Congress is neither friend nor family, it also leaves its imprint on the occasion by bestowing important tax benefits upon married couples. For the typical taxpayer, the impact of this favorable treatment is most visible through the joint taxation of the marital unit. Joint returns are subject to tax rates which are lower their individual counterparts. In addition, the benefits of this arrangement are compounded by the ability of a married couple to jointly file regardless of their respective incomes. As such, joint returns represent a permissible method of income shifting. Although Minnesotans often benefit by filing a joint return, such an arrangement can also produce inequitable results.
In addition to the above-listed benefits, taxpayers who file as a couple are also subject to joint and several liability for the payment of tax, including interest and penalties. Joint and several liability can create an injustice where only one of the spouses is liable for the underlying tax deficiency. One common situation involves a wife who the IRS claims is liable for additional tax on a joint return due to the illegal activities of her husband. Prior to 1971, the wife in this example would be held liable for the tax, interest, and resulting penalties even though she had no knowledge of her husband’s illegal activities.
In recognition of this problem, Congress passed Interal Revenue Code Section 6015. This provision, also known as “innocent spouse” relief, grants a limited release from joint liability under certain circumstances. Originally narrow in scope, Section 6015 was extensively revised in 1998 to extend protection to a greater number of people. Under Section 6015(b), relief will be granted if the affected spouse can establish that she did not know of the liability attributable to an erroneous item of her husband. Equally important, the petitioner for relief must establish that it would be inequitable to be held liable for the deficiency in tax. In order to apply for innocent spouse relief, the petitioner must elect to apply this provision within two years after the date on which the IRS has instituted collection activities.
Although it may seem like a simple procedure, the above-described provision entails an inquiry which is highly fact specific. If the IRS is attempting to collect a debt attributed to the illegal acts of your spouse (or former spouse), do not hesitate to contact a tax attorney.