Can I apply for “innocent spouse relief” if my husband or wife owes past taxes or files for bankruptcy?

It’s possible. First understand that under U.S. tax laws, married couples can be held liable for both their own taxes and their spouse’s taxes on any filed joint tax return. You can also be held liable for your spouse’s taxes if you live in one of the nine community property states of Wisconsin, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington. So if you filed jointly or live in a community property state, even if the tax incurred was a direct result of one spouse's actions, the other spouse will be equally responsible for paying the tax debt.

However, there is some good news. The “innocent spouse” defense acknowledges that filing jointly could force one individual in a relationship to take on more than his or her fair share of financial burden. If one spouse wishes to remain solely liable for the debt, he or she may apply for innocent spouse relief, discharging the “innocent” spouse of both tax and bankruptcy liabilities.

Can Bankruptcy Protect an Innocent Spouse?

Yes. That’s the short answer. However, this can be a very complicated question, and it depends on a number of factors. In general, using the bankruptcy courts to protect the innocent spouse—and even wipe out the tax debt—has been proven to be a powerful tax solution. Yet in other cases the innocent spouse is better served by avoiding bankruptcy and seeking the assistance of another court, such as the United States Tax Court. It cannot be stressed enough that it’s wise to hire a lawyer who is familiar with both the Internal Revenue Code as well as the Bankruptcy Code. There is too much at stake to leave your tax problem in the hands of the inexperienced.

What About Back Taxes for the Innocent Spouse?

When accepted by the IRS, the innocent spouse defense will relieve your spouse (or former spouse) of taxes, interest, and penalties that were filed by you and the spouse on a joint tax return, as long as…

  • It would be unfair to hold the innocent spouse accountable for past amounts.
  • The defense is claimed within two years after IRS has begun collection proceedings.
  • Each year of taxes in question were filed via a joint tax return.
  • There is a significant understatement of tax liability due to listings by the non-innocent spouse on each return.
  • The innocent spouse did not know and should not have known about the non-innocent spouse’s liability.

Is There Any Way to Protect My Spouse From My Debts?

Yes, legal tax strategies can protect one spouse. We understand that you want to protect your loved ones from an unfair financial burden. Faith Law Firm can help you. We can find a solution that will allow your spouse to pay as little tax as possible, and keep as much of his or her assets as legally possible. The goal is to prevent your tax problem from coming between you and your family. Click the contact link on this page to have us examine your case today.