If you live in a community property state and did not file a joint return, you may be eligible for Innocent Spouse Relief. Community property laws apply to couples who live in the states of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. The IRS follows the collections rules for those states based on community property law.
Married couples with joint returns can file for Innocent Spouse Relief. Couples in community property states that did not file joint returns still use Form 8857, but have two different options. First, there is Relief From Liability For Tax Attributable To An Item Of Community Income. Your second option entails Equitable Relief.
Relief From Liability For Tax Attributable To An Item Of Community Income
Conditions To Qualify For Relief In States With Community Property Laws
A spouse that lives in a state with community property laws and did not file a joint return must meet all of the following conditions to qualify for relief:
- For the tax year in question, you did not file a joint return.
- You did not report the item in question as gross income.
- The item you did not include also meets one of the following criteria:
- Your spouse’s compensation for services as an employee. This includes wages, salaries, or other compensation as an employee.
- Your spouse’s income as a sole proprietor of a trade or business.
- Partnership income from a distributive share.
- Your Spouse’s separate property income. Community property laws define separate property.
- Other income from an item belonging to your spouse under community property law.
- Show that you were not aware, nor had any reasonable cause to be aware of the community income.
- With all the facts you provide, show that it would be unfair to hold you responsible for the community income item.
The Time Frame To File For Relief
Spouses who meet all the conditions above must file at least 6 months before the assessment period ends. The assessment period includes any extensions and is generally 3 years from date you filed the return. If the IRS starts an examination of your return in the final six months of the assessment period, you have 30 days to file from the date of their notice.
As you can see, community tax laws and Innocent Spouse Relief come with quite a few stipulations. Don’t hesitate to contact us for a free consultation if you would rather not deal with it all by yourself. One of our experienced tax attorneys will give you a free assessment of your situation.