How to Get Equitable Relief from the IRS?
Understand the IRS's fairness-based review for granting equitable relief and resolving a joint tax liability that isn't your responsibility.
When married couples file a joint tax return, both individuals are held equally responsible for the entire tax liability, a concept known as joint and several liability. This remains true even if a divorce occurs after the filing. Equitable relief is a remedy provided by the Internal Revenue Service (IRS) that can release a person from this shared responsibility.
This relief is for situations where it would be unfair to hold one spouse accountable for tax debts from the other spouse’s errors or misconduct. It can apply to both understatements of tax and underpayments of tax. The IRS examines a couple’s financial life to decide if one spouse should be freed from a tax burden they did not create and were unaware of.
Conditions for Claiming Equitable Relief
To be considered for equitable relief, a taxpayer must satisfy several threshold conditions. A joint return must have been filed for the tax year in question. Relief must not be available under the other two types of innocent spouse relief, known as innocent spouse relief and separation of liability. The request must be made within the time the IRS has to collect the tax, which is generally ten years from the date the tax was assessed.
The tax liability in question must be attributable to an item of the non-requesting spouse. Other conditions must also be met.
- The spouse requesting relief must not have knowingly participated in filing a fraudulent joint return.
- The requesting spouse must not have transferred assets to the other spouse as part of a fraudulent scheme.
- The non-requesting spouse cannot have transferred disqualified assets to the requesting spouse for tax avoidance purposes.
Once these initial requirements are met, the IRS evaluates positive and negative factors to determine if granting relief is equitable. Positive factors include being separated or divorced from the other spouse and the potential for economic hardship if relief is not granted. The IRS considers a taxpayer to face economic hardship if paying the tax would prevent them from affording basic living expenses. Evidence of abuse from the other spouse or that the requesting spouse was unaware of the tax issue are also strong positive factors.
Conversely, negative factors can weigh against granting relief. If the requesting spouse knew or had reason to know about the item causing the tax deficiency, the IRS is less likely to grant relief. Receiving a significant benefit from the unpaid tax, beyond normal support, is another negative factor. The IRS will also consider if the requesting spouse has a history of not complying with income tax laws in subsequent years.
Information and Documentation for Your Claim
The formal request for equitable relief is made by filing Form 8857, Request for Innocent Spouse Relief, with the IRS. You must gather comprehensive documentation that substantiates the claims made on the form, addressing the eligibility conditions and factors the IRS will consider.
To demonstrate a lack of knowledge about the tax understatement, you could provide affidavits or correspondence that shows you were misled about your household’s financial situation. To establish economic hardship, you should compile documents such as current bank statements, monthly bills for rent and utilities, and proof of income. These documents help the IRS assess whether paying the tax would leave you unable to meet your basic needs.
If spousal abuse or financial control was a factor, supporting evidence is important. This can include police reports, court orders, or letters from shelters, social workers, or medical professionals. Every piece of information on Form 8857 should be backed by credible documentation that paints a complete picture of your situation for the IRS.
When completing Form 8857, you will be asked to explain why you believe you should not be held responsible for the tax liability. This narrative is your opportunity to connect the facts of your case to the requirements for equitable relief. Describe your involvement in financial matters, any deception by your spouse, and the consequences you would face if forced to pay the tax.
The IRS Review and Determination Process
After you complete Form 8857 and compile all necessary supporting documents, the package must be mailed to the IRS processing center for these claims. The mailing address can be found on the IRS website or in the instructions for Form 8857. It is advisable to send the package via certified mail with a return receipt for proof of submission and delivery.
Upon receiving your claim, the IRS will notify the non-requesting spouse (your spouse or former spouse from the joint return). The IRS is legally required to inform them that you have requested relief and provide them with an opportunity to submit information they believe should be considered.
The IRS will analyze the information provided and issue a preliminary determination letter. You and the non-requesting spouse will both have an opportunity to respond to this preliminary determination before a final decision is made.
Following the response period, the IRS will issue a final determination letter. If your claim is denied, the letter will explain the reasons for the denial. The letter will also inform you of your right to appeal the decision by filing a petition with the U.S. Tax Court, which must be done within 90 days of the date of the final determination letter.