What Is Form 15227 and How Do You File It?

When married individuals in community property states separate, they can face unique tax challenges, as income earned by either spouse is considered split equally for tax purposes. The IRS provides relief from this rule under specific circumstances, allowing a taxpayer to be taxed only on their own income. This is designed to prevent unfair tax situations when spouses are estranged and do not have access to or control over the other’s earnings.

Eligibility for the Disregarded Community Property Election

To qualify for relief from community property tax laws, a taxpayer must meet criteria outlined in Internal Revenue Code Section 66. One path to eligibility is for spouses who lived apart for the entire calendar year, did not file a joint tax return, and did not transfer earned income to one another during that year. This provision is for individuals leading separate financial lives.

Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, income earned during the marriage is treated as belonging to both spouses equally. These relief provisions allow the IRS to tax income directly to the spouse who earned it, bypassing the standard 50/50 split.

Another path is equitable relief. This can be granted if a taxpayer filed a separate return and did not know, or have reason to know, about an item of community income earned by their spouse. To grant this relief, the IRS must determine that under all facts and circumstances, it would be unfair to include the other spouse’s income on the taxpayer’s return.

Information and Documentation for Form 8857

To request relief, you must complete IRS Form 8857, Request for Innocent Spouse Relief, which covers community property law issues. The form requires your personal details, such as your name, address, and Social Security number. You must also provide the same information for your spouse or former spouse for the tax year in question.

You must provide detailed financial information for the year(s) for which you are requesting relief. This includes a breakdown of your income and an explanation of the community income items that should not be attributed to you. The form also asks for your current marital status and the effective date of any divorce or separation. Supporting documentation, such as legal separation agreements or proof of separate residences, is required.

On Form 8857, you must explain why you qualify for relief. Clearly state which conditions you meet, referencing your separation, lack of knowledge of the income, or other equitable reasons. You will also need to describe your financial situation and explain why holding you responsible for the tax would be unfair.

Filing Form 8857 and Next Steps

After completing and signing Form 8857, mail it to the IRS. If using the U.S. Postal Service, send it to Internal Revenue Service, P.O. Box 120053, Covington, KY 41012. For private delivery services, use Internal Revenue Service, 7940 Kentucky Drive, Stop 840F, Florence, KY 41042. Do not file this form with your annual tax return.

After you submit the form, the IRS is required to contact your spouse or former spouse. They will be notified of your request and given an opportunity to participate in the process. The IRS will not disclose your personal information, such as your current address or phone number. The review process can take several months, and the IRS may contact you for more information.

The IRS will issue a determination letter stating whether your request for relief has been granted, partially granted, or denied. If relief is granted, the tax liability for your spouse’s community income will be removed from your account and reassigned to them. If your request is denied, the letter will explain your right to appeal the decision to the U.S. Tax Court.