Innocent Spouse Rule on Taxes Relaxed

Way too often, clients come in who are totally in the dark about family finances.

Their spouse has been bringing home the bacon, managing the family accounts, paying the family bills, working with the family or their business accountant to prepare tax returns.

In too many instances, the breadwinning spouse orders the the other spouse to sign a joint return right now without even reviewing it. “It’s all correct, I’ve already checked, just sign it.”

That spouse may well be abusive, to one degree or another.

As a result, the intimidated spouse really has no idea how much comes in or even what brings it in, let alone the difference between gross and net and the basis for the spread.

They may – or may not – have some vague hunch that something is not quite right. But they are afraid to ask any questions, much less challenge their spouse.

And so it always comes as a rude shock that they are generally just as accountable and responsible to the Internal Revenue Service (IRS) as the controlling, breadwinning spouse.

Unless they qualify under IRS rules as an Innocent Spouse.

And under the traditional rule, it wasn’t always so easy to qualify and the relief wasn’t always so expansive.

Thanks to recent changes in the rules, it is now easier for an ignorant spouse to qualify for meaningful relief as an innocent spouse, as long as the couple is divorced or living separately for a year.

The new rule may excuse or reduce the liability of not only an unknowing spouse but also even a knowing spouse who signs a return under duress from the breadwinning spouse.

The new rule also reduces the impact of a two year time limit on claims for innocent spouse status. This change will even allow previously rejected applicants to reapply for protection.