Introduction

Many married taxpayers choose to file a joint tax return because of certain benefits this filing status allows. Both taxpayers are jointly and individually responsible for the tax and any interest or penalty due on the joint return even if they later divorce. This is true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse.

In some cases, a spouse will be relieved of the tax, interest, and penalties on a joint tax return. Three types of relief are available.

1. Innocent spouse relief.
2. Separation of liability.
3. Equitable relief.

This publication explains these types of relief, who may qualify for them, and how to get them. Each type of relief has different requirements. They are explained separately in different parts of this publication. Read each part to see if you qualify for that type of relief. You can also use the Innocent Spouse Tax Relief Eligibility Explorer at www.irs.gov to see if you qualify for innocent spouse relief. Click on Individuals, Innocent Spouses, and Explore if you are an Eligible Innocent Spouse.

You can use the flowcharts at the end of this publication to see if you qualify for innocent spouse relief, relief by separation of liability, or equitable relief. You may also want to see Questions & Answers, near the end of this publication for a list of questions and answers about these types of relief.

You are not required to figure the tax, interest, and penalties that qualify for relief. The IRS will figure these amounts after you file Form 8857, Request for Innocent Spouse Relief.

You can only qualify for equitable relief if you do not qualify for innocent spouse relief or relief by separation of liability.

Married persons who file separate returns in community property states may also qualify for relief. See Community Property Laws, later.

What this publication does not cover.   This publication does not discuss filing an injured spouse claim. You are an injured spouse if your share of the overpayment shown on your joint return was, or is expected to be, applied against your spouse's past-due federal debts, state taxes, or child or spousal support payments. If you are an injured spouse, you may be entitled to receive a refund of your share of the overpayment. For more information, get Form 8379, Injured Spouse Claim and Allocation.

Useful Items You may want to see:

Forms (and instructions)

• 8857   Request for Innocent Spouse Relief
• 12510   Questionnaire for Requesting Spouse

How To Request Relief

File Form 8857 to ask the IRS for the types of relief discussed in this publication. You only need to file one Form 8857 even if you are requesting relief for more than one tax year.

You must attach a statement to Form 8857 explaining why you believe you qualify for relief. You must also provide certain information for each type of relief you are requesting. See the instructions for Form 8857 for more information.

You can help the processing of your request by completing Form 12510, and attaching it to Form 8857. To get Form 12510, go to www.irs.gov or call 1-800-TAX-FORM (1-800-829-3676).

The IRS will review your Form 8857, figure the understatement or underpayment of tax and related interest and penalties, and let you know if you qualify.

A completed Form 8857 is shown later.

When to file Form 8857.   You should file Form 8857 as soon as you become aware of a tax liability for which you believe only your spouse or former spouse should be held liable. However, you must file Form 8857 no later than 2 years after the date on which the IRS first attempted to collect the tax from you after July 22, 1998. Examples of attempts to collect the tax from you are garnishment of your wages and applying your refund in a later year to the tax due.

IRS spousal notification.   The IRS is required to inform your spouse (or former spouse) if you request innocent spouse relief or separation of liability, and to allow your spouse (or former spouse) to participate in the determination of the amount of relief from liability.

Tax Court Review of Request

After you file Form 8857 you can ask the United States Tax Court to review your request. You can ask the United States Tax Court to review your request in the following two situations.

1. You disagree with the IRS' final determination notice telling you the extent to which your request for relief has been denied.
2. You have not received a final determination notice from the IRS within 6 months from the date you filed Form 8857.

The United States Tax Court is an independent judicial body and is not part of the IRS.

You must file a petition with the United States Tax Court in order for it to review your request for relief. You must file the petition no later than the 90th day after the date the IRS mails its final determination notice to you. If you do not file a petition, or you file it late, the Tax Court cannot review your request for relief.

You can get a copy of the rules for filing a petition by writing to the Tax Court at the following address.

United States Tax Court
400 Second Street, NW
Washington, DC 20217

Community Property Laws

You must generally follow community property laws when filing a tax return if you are married and live in a community property state. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Generally, community property laws require you to allocate community income and expenses equally between both spouses. However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability.

Married persons who filed separate returns in community property states have two ways to get relief.

Relief from separate return liability for community income.   You are not responsible for reporting an item of community income if all the following conditions exist.

• You filed a separate return for the tax year.
• You did not include an item of community income in gross income on your separate return.
• You establish that you did not know of, and had no reason to know of, that community income.
• Under all facts and circumstances, it would not be fair to include the item of community income in your gross income.

Requesting relief.   You request relief from separate return liability for community income by filing Form 8857, as discussed earlier. Write Innocent Spouse Relief Under IRC 66(c) across the top of Form 8857. Fill in Parts I, II and V. Leave Parts III and IV blank. Attach a statement to the form explaining why you believe you qualify for relief. Mail the form to the address listed in the Form 8857 instructions.

Equitable relief.   If you do not qualify for the relief described above and are now liable for an underpayment or understatement of tax you believe should be paid only by your spouse (or former spouse), you may request equitable relief (discussed later).

Innocent Spouse Relief

By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse did something wrong on your tax return. The tax, interest, and penalties that qualify for relief can only be collected from your spouse. However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. The IRS can collect these amounts from either you or your spouse.

You cannot be granted relief from household employment taxes that are reported on Form 1040.

You must meet all of the following conditions to qualify for innocent spouse relief.

1. You filed a joint return which has an understatement of tax due to erroneous items (defined later) of your spouse.
2. You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax.
3. Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax. (See Indications of Unfairness for Innocent Spouse Relief, later.)

Understatement of Tax

An understatement of tax is generally the difference between the total amount of tax that should have been shown on your return and the amount of tax that was actually shown on your return.

The IRS will figure the understatement of tax due to erroneous items of your spouse after you file Form 8857. You are not required to do this computation.

Partial relief when extent of understatement is unknown.   You may qualify for partial relief if, at the time you filed your return, you knew or had reason to know, that there was an understatement of tax due to your spouse's erroneous items, but you did not know how large the understatement was. You will be relieved of the understatement to the extent you did not know about it and had no reason to know about it.

Example.   At the time you signed your joint return, you knew that your spouse did not report $5,000 of gambling winnings. The IRS examined your tax return several months after you filed it and determined that your spouse's unreported gambling winnings were actually $25,000. This resulted in a much larger understatement of tax than you knew about at the time you signed your return. You established that you did not know about, and had no reason to know about, the additional $20,000 because of the way your spouse handled gambling winnings. The understatement of tax due to the $20,000 will qualify for innocent spouse relief if you meet the other requirements. The understatement of tax due to the $5,000 of gambling winnings will not qualify for relief.

Erroneous Items

Erroneous items are either of the following.

1. Unreported income. This is any gross income item received by your spouse that is not reported.
2. Incorrect deduction, credit, or basis. This is any improper deduction, credit, or property basis claimed by your spouse.

The following are examples of erroneous items.

1. The expense for which the deduction is taken was never paid or incurred. For example, your spouse, a cash-basis taxpayer, deducted $10,000 of advertising expenses on Schedule C (Form 1040), but never paid for any advertising.
2. The expense does not qualify as a deductible expense. For example, your spouse claimed a business fee deduction of $10,000 that was for the payment of state fines. Fines are not deductible.
3. No factual argument can be made to support the deductibility of the expense. For example, your spouse claimed $4,000 for security costs related to a home office, which were actually veterinary and food costs for your family's two dogs.

Indications of Unfairness for Innocent Spouse Relief

The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understatement. Two indicators the IRS may use to decide that it is unfair to hold you responsible for the tax are whether you:

1. Received any significant benefit from the understatement of tax, or
2. Were later divorced from or deserted by your spouse.

Significant benefit.   You can receive significant benefit either directly or indirectly. For example, if your spouse did not report $10,000 of income on your joint return, you can benefit directly if your spouse shares that $10,000 with you. You can benefit indirectly from the unreported income if your spouse uses it to pay extraordinary household expenses.

You do not have to receive a benefit immediately for it to be significant. For example, money your spouse gives you several years after he or she received it or amounts inherited from your spouse (or former spouse) can be a significant benefit.

Support payments that you receive as a result of a divorce proceeding are not a significant benefit.

Relief by Separation of Liability

Under this type of relief, you allocate (divide) the understatement of tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse). The understatement of tax allocated to you is generally the amount you are responsible for. See How To Figure Your Separation of Liability, later.

You can request this type of relief whether or not you request innocent spouse relief.

To request relief by separation of liability, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857.

• You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. (Under this rule, you are no longer married if you are widowed.)

• You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857.

Burden of proof.   You have the burden of proof in establishing the basis for separating your liability.

Invalid request.   Even if you meet the requirements discussed previously, a request for separation of liability will not be granted in the following situations.

1. The IRS proves that you and your spouse transferred assets as part of a fraudulent scheme.
2. The IRS proves that at the time you signed your joint return, you had actual knowledge of any items giving rise to the deficiency that were allocable to your spouse.
3. Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. See Transfers of property to avoid tax, later.

In situations (2) and (3), a request will be denied only for the part of the deficiency due to the incorrect items about which you had actual knowledge, or to the extent of the value of the property transferred. If you establish that you signed your joint return under duress, then it is not a joint return, and you are not liable for amounts from that return. However, you may be required to file a separate return for that tax year.

Example.   Bill and Karen Green filed a joint return showing Karen's wages of $50,000 and Bill's self-employment income of $10,000. The IRS audited their return and found that Bill did not report $20,000 of self-employment income. The additional income resulted in a $6,000 understatement of tax, plus interest and penalties. After obtaining a legal separation from Bill, Karen filed Form 8857 to request relief by separation of liability. The IRS proved that Karen actually knew about the $20,000 of additional income at the time she signed the joint return. Bill is liable for all of the understatement of tax, interest, and penalties because all of it was due to his unreported income. Karen is also liable for the understatement of tax, interest, and penalties due to the $20,000 of unreported income because she actually knew of the item. The IRS can collect the entire deficiency from either Karen or Bill.

Transfers of property to avoid tax.   If your spouse transfers property to you for the main purpose of avoiding tax or payment of tax, the tax liability allocated to you will be increased by the value of the property transferred. A transfer will be presumed to have as its main purpose the avoidance of tax or payment of tax if the transfer is made after the date that is 1 year before the date on which the IRS sent its first letter of proposed deficiency allowing you an opportunity for a meeting in the IRS Appeals Office. This presumption will not apply if the transfer was made under a divorce decree, separate maintenance agreement, or a written instrument incident to such an agreement. The presumption will also not apply if you establish that the transfer did not have as its main purpose the avoidance of tax or payment of tax.

How To Figure Your Separation of Liability

The IRS will figure your separation of liability and figure any related interest and penalties after you file a completed Form 8857 with the required attachment. You are not required to figure these amounts. But if you wish, you can figure your separation of liability yourself by using Worksheet 1 and instructions that follow. However, if you filed Form 8814 to report your child's tax liability on your joint return, do not include that liability when figuring your separation of liability. Allocate it as appropriate between you and your spouse. Also do not include household employment taxes that are reported on Form 1040.

Instructions for Completing Worksheet 1

Use the following instructions to complete Worksheet 1.

Line 1.   When allocating income and deductions taken into account in computing the understatement of tax, allocate them in the same manner you would have allocated them if you and your spouse had filed separate returns.

Allocate wages and salaries to the spouse who performed the services and received the Form W-2. You generally allocate business and investment income (including capital gains) according to which spouse owned the business or investment that produced the income. Income from a jointly owned business or investment should be allocated equally between you and your spouse unless there is evidence that shows a different allocation is appropriate.

Allocate business deductions according to the ownership of the business. Allocate personal deductions (such as itemized deductions for mortgage interest and taxes) equally between you and your spouse unless there is evidence that shows a different allocation is appropriate, or the IRS establishes that you had actual knowledge of the joint items.

Items that are limited or not allowed on separate returns.   If a deduction would not be allowed if you had filed a separate return, figure the deduction as you would on a joint return and allocate that amount between you and your spouse.

A similar rule applies to income and deductions (such as taxable social security benefits and the IRA deduction) that are subject to special limits on a separate return. Figure these items as you would on a joint return and allocate them between you and your spouse.

Example.   Charles and Mary filed a joint return for 2000. Charles received social security benefits in 2000, but none of them were taxable because his and Mary's total income was less than the base amount ($32,000) for joint returns. Several months after filing their return, Charles and Mary received a notice from the IRS for additional tax because they did not report some interest and dividend income. The notice also showed that half of Charles' social security benefits were taxable because the additional interest and dividend income increased their total income so that it was more than the $32,000 base amount. If Charles had filed a separate return, 85% of his social security benefits would have been taxable. When figuring his separation of liability, Charles allocates only half of his social security benefits. This is true even though 85% of his benefits would have been taxable if he and Mary had filed separate returns.

Items allocable to one spouse that benefit the other spouse.   An item that is otherwise allocable to one spouse must be allocated to the other spouse to the extent the item created a tax benefit on the return for the other spouse. This does not relieve the first spouse of liability. Rather, both spouses will be jointly and severally liable for the item to the extent of the benefit received.

Example.   Your joint return shows $50,000 of wages allocable to you and $15,000 of self-employment income allocable to your spouse. The IRS audited your return and disallowed a $20,000 business deduction allocable to your spouse. Only $15,000 of the disallowed deduction offset your spouse's self-employment income. The remaining $5,000 must be allocated to you because that amount offset your income.

Lines 5 and 6.   Enter the part of the understatement of tax that is due to the disallowance of a credit or to the increase in any tax other than the income tax or alternative minimum tax. Allocate credits and other taxes in the same manner you would have allocated them if you and your spouse had filed separate returns.

Worksheet 1.Worksheet for Figuring Your Separation of Liability (Note: This worksheet is optional. Keep it for your records. Do not mail to the IRS.)

1.	Enter the net amount of income and deductions taken into account in computing the understatement of tax and allocated to you*			1.
2.	Enter the net amount of all income and deductions taken into account in computing the understatement of tax*			2.
3.	Divide line 1 by 2. Enter the result as a decimal (rounded to at least 3 places)			3.
4.	Enter the understatement of tax*		4.
5.	Enter the credits and other taxes taken into account in computing the understatement of tax and allocated to your spouse*	5.
6.	Enter the credits and other taxes taken into account in computing the understatement of tax and allocated to you*	6.
7.	Add lines 5 and 6		7.
8.	Subtract line 7 from line 4			8.
9.	Multiply line 8 by line 3			9.
10.	Add lines 9 and 6. This is the understatement of tax you are responsible for			10.

*This should be shown on the IRS notice or audit report.

Example.   You reported $750 in self-employment tax on your return. All of this tax is allocable to you. The IRS audited your return and determined that your self-employment tax should have been $1,100. On line 6, you enter the $350 increase in self-employment tax ($1,100 - $750).

Credits that are not allowed on separate returns.   If a credit would not be allowed if you had filed a separate return, figure the credit as you would on a joint return and allocate it between you and your spouse. Examples of credits that are generally not allowed on a separate return are the child and dependent care credit, the credit for the elderly, the adoption credit, the education credits, and the earned income credit.

Example.   You claimed a credit of $860 for child and dependent care expenses on your tax return. The IRS audited your return and allowed you only $500. The remaining $360 was disallowed. Even though none of the credit would have been allowed on separate returns, you are entitled to a $500 credit for purposes of figuring your separation of liability. You allocate the $360 disallowance (rather than the full $860) between you and your spouse (or former spouse) on lines 5 and 6 of Worksheet 1.

Credits allocable to one spouse that benefit the other spouse.   A credit that is otherwise allocable to one spouse must be allocated to the other spouse to the extent the item created a tax benefit on the return for the other spouse. This does not relieve the first spouse of the liability. Rather, both spouses will be jointly and severally liable for the item to the extent of the benefit received.

Example.   Tom and Donna filed a joint return that showed $30,000 of wages attributable to Tom and a $1,000 lifetime learning credit attributable to Donna. The lifetime learning credit was for Donna's graduate tuition expenses. Since Donna had no income, the entire credit offset $1,000 of Tom's income tax on the return. Tom received the tax benefit on the return from the entire credit. The IRS audited their return and disallowed $400 of the credit. Tom and Donna remain jointly and severally liable for the $400 deficiency. It was Donna's item and Tom received a $400 tax benefit.

Worksheet 1 Example

Cindy and Clarence Brown filed a joint return for 2000. They divorced in 2001. On April 30, 2002, the IRS issued a Notice of Deficiency to the Browns relating to their 2000 return. There were four items listed on the notice.

1. $2,378 is nonemployee compensation that Clarence got for some consulting work and did not report.
2. $336 is self-employment tax related to the $2,378 nonemployee compensation.
3. $168 is the deduction for half of the self-employment tax.
4. $500 is interest income from Cindy's bank account.

Cindy decides to file Form 8857 (not illustrated) to request relief under separation of liability. She allocates the items between her and Clarence as follows and attaches this allocation to Form 8857.

Although not required, Cindy uses Worksheet 1 to determine the understatement of tax that is allocable to her. She fills out the worksheet (shown on page 8) as follows.

Line 1.   Cindy enters the interest income from her bank account.

Line 2.   The net amount of income and deductions taken into account in computing the understatement of tax is $2,710. This is the sum of the nonemployee compensation, $2,378, and interest income, $500, minus the deduction for one-half of self-employment tax, $168.

Line 3.   Cindy divides line 1 by line 2 to get .185.

Line 4.   Cindy enters the $743 understatement of tax. This is shown on the Notice of Deficiency.

Line 5.   Cindy enters Clarence's self-employment tax of $336.

Line 6.   Cindy enters -0- because there are no credits or other taxes to be allocated to her.

Lines 7-10.   Cindy completes lines 7 through 10. Line 10 shows that she is responsible for $75 of the understatement of tax. Clarence is responsible for the remaining amount ($668).

Items to allocate	Cindy	Clarence
Nonemployee compensation		$ 2,378
Interest income	$ 500
Deduction for 1/2 of self-employment tax		168
Self-employment tax		336

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