Q: My ex-husband owns a small business. During our marriage, we jointly filed our tax returns that reported the income of my ex-husband’s business. I was not involved with my ex-husband’s business or the tax return preparation. I just signed the tax returns. A few months ago, the IRS examined one of our jointly filed tax returns. My ex-husband handled the audit, but the IRS assessed a large tax bill. Am I eligible for innocent spouse relief?
A: When spouses jointly file a tax return, they assume joint and several liability for the payment of the tax as well as any penalties and interest. Innocent spouse relief removes the innocent spouse from the responsibility to pay the tax, penalties, and interest. All five of the following requirements must be met to qualify for innocent spouse relief. A joint tax return was filed. The understatement of tax was due to erroneous items of your spouse. At the time of signing the joint return, the innocent spouse did not know and had no reason to know that there was an understatement of tax. Based upon all the facts and circumstances, it would be unfair to for the innocent spouse liable for the understatement of tax. The innocent spouse requested the relief within two years of the IRS’ initial collection activity.