| Boy meets Girl. Boy marries Girl. After five years, Boy | | | | a mistake. However, a taxpayer may be relieved of |
| files for divorce from Girl and skips town. Shortly | | | | responsibility for paying tax, interest, and penalties |
| thereafter, IRS contacts Girl, because Boy didn't report | | | | because a spouse or former spouse failed to report |
| all his income on their last joint tax return. Girl signed | | | | income properly (which can include leaving out income, |
| the return, so she was liable for the tax. Girl screams. | | | | or claiming improper deductions or credits), if he or she |
| Okay, so it's not exactly a classic love story. But, sadly, | | | | meets all of the following conditions: |
| it's a story that rings true for many an unfortunate | | | | 1) The spouses must have filed a joint return with an |
| taxpayer -- with some variations. Sometimes, Boy | | | | understatement of tax directly related to the spouse's |
| passes away, leaving Girl with the unpaid taxes. | | | | erroneous items. |
| Sometimes Boy is available, but bankrupt. Sometimes | | | | 2) The taxpayer seeking relief can establish that at the |
| it's Girl who underpays her taxes and leaves Boy with | | | | time he/she signed the joint return, he/she did not |
| the bill. Whatever the circumstance, the IRS ends up | | | | know, and had no reason to know, that there was an |
| collecting tax from someone who's liable only because | | | | understatement of tax. |
| he or she filed a joint tax return. | | | | 3) Taking into account all the facts and circumstances, |
| But, wait -- don't ALL married couples file joint tax | | | | it would be unfair to hold taxpayer liable for the |
| returns? Isn't that in the vows somewhere, right after | | | | understatement of tax. |
| "til death do us part" or "in sickness and in health"? | | | | The bottom line? It's possible to keep from getting |
| Well, it's true that most married couples do file jointly, | | | | stuck with your ex's back taxes, if you can prove |
| simply because it's usually simpler and cheaper to do | | | | definitively that you were unaware of the error, and |
| so. But it's important to keep in mind that filing jointly is | | | | that it would be unfair to hold you responsible for the |
| an elected practice, and can sometimes create | | | | penalty. Girl may still have to deal with the pain, but at |
| problems. | | | | least she won't have to get stuck paying for Boy's tax |
| Filing a joint return means that both individuals are | | | | mistake. And that's a happy ending all it's own. |
| responsible for the taxes owed, even if one person | | | | EA Exam Review Tool tip |
| made the majority -- or even the entire amount-- of | | | | The rules for innocent spouse relief fall under the |
| taxable income, and even if they later divorce. Signing | | | | category "Specific Types of Representation". |
| a joint return means consenting to joint and several | | | | Approximately 25% of the questions on the |
| liability. Joint liability means Boy and Girl are both liable; | | | | Representation, Practice, and Procedures exam are |
| several liability means Boy and Girl are EACH liable for | | | | from this category. A quality EA exam study guide or |
| the entire amount. If the IRS determines there was a | | | | EA exam preparation course should provide a detailed |
| deficiency in tax after the return is filed, it is authorized | | | | analysis of these rules. Information on Innocent Spouse |
| to go after each spouse individually. What does that | | | | Relief is also available in IRS publication 971. If you are |
| mean for poor Girl? The IRS doesn't know or care | | | | like me and prefer something a little easier to follow, |
| that Boy and Girl are no longer married; it simply is | | | | you may prefer the streamlined explanations that |
| trying to collect back taxes. If the spouse responsible | | | | quality EA exam review courses provide. Regardless |
| for the erroneous items is inaccessible for collection, | | | | of your preference in EA exam study materials, it is |
| then the IRS will look to the "innocent" one. | | | | important that you have a solid understanding of |
| This is where Innocent Spouse Relief comes into play. | | | | innocent spouse relief and other specific types of |
| Under normal circumstances, the IRS holds both | | | | representation before you sit for the IRS Special |
| spouses equally responsible for any taxes and | | | | Enrollment Examination. |
| penalties on a joint tax return, regardless of who made | | | | |