In the case that you do not qualify for the general type of Innocent Spouse Relief or for Separation Of Liability Relief, you still may have an option. The next step is to determine if you live in a community property state and file for relief from liability for tax attributable to an item of community income. If you find that you still do not qualify, you may be eligible for Equitable Relief. Unlike the other types, you may qualify for Equitable Relief even for correctly reporting items if they remain unpaid.
What Are The Conditions To Qualify & When Should You File For Equitable Relief?
There are several factors the IRS looks at when determining eligibility for Equitable Relief. Go through the list below to see if you meet the requirements.
*Note: The first two conditions do not apply to those filing for relief from liability for tax attributable to an item of community income.
- You do not qualify for Innocent Spouse Relief or Separation of Liability Relief.
- The tax years at issue are on a joint return.
- You meet all deadlines when filing for support.
- No transferring of assets between you and your spouse to defraud the IRS or any third party.
- Your spouse did not transfer the property over to you in an attempt to avoid taxes.
- You have no knowledge of any fraud on the return.
- The relief you seek is due to an item belonging to your spouse or ex-spouse. This can also be an understated tax you owe from a source of your spouse’s income. If you are responsible for part of the item, the IRS will only assess liability for the part you owe.
Conditions For Exemption To Attributable Items
Even if an item on your return is attributable to you in whole or in part, you may not be responsible for it under certain conditions. Those conditions are as follows:
- The item is only attributable to you (in part or whole) because of community property laws.
- A title in your name is attributable to you, though you may contest this if the facts show it’s an unfair condition.
- Misappropriate use of funds by your spouse set aside for the payment of taxes that you were unaware of.
- The IRS will consider relief to any victim of spousal abuse or domestic violence.
- Proof that an item attributable to you is the result of fraud by your spouse.
Additional Factors The IRS Considers When Determining Equitable Relief
Determining equitable relief is a process. Besides the conditions above, the IRS considers all factors before making a decision. Here are examples of other facts the IRS will consider when reviewing your file:
- Marital Status – The IRS will check to see if you are still married or not. If you are divorced, legally separated, or widowed, it will weigh in your favor. This also applies if you establish that you didn’t live in the same household for the 12 months leading up to filing Form 8857.
- Economic Hardship – You may receive relief if the IRS finds evidence of economic hardship due to the assessment. The IRS generally considers economic hardship as the inability to pay for basic living expenses.
Not everyone is going to qualify for Equitable Relief, but we can give you a realistic outlook on your case.