As an Orange County Tax Attorney and CPA, I often encounter clients facing tax liabilities due to discrepancies in jointly filed tax returns. One of the most critical relief provisions available to qualifying taxpayers is Innocent Spouse Relief.
In this blog, we’ll delve into what Innocent Spouse Relief is, how it works in California, and who may qualify.
Innocent Spouse Relief is a tax provision under the Internal Revenue Code (IRC) 6015 that allows individuals to be relieved of responsibility for paying taxes, interest, and penalties if their spouse (or former spouse) improperly reported or omitted items on their joint tax return. This is because the IRS recognizes that in some cases, one spouse might be unaware of these inaccuracies.
The primary benefit of successful innocent spouse relief is the relief from joint tax liability, meaning you will not pay the portion of the tax bill that by law was due.
California, conforming largely to federal tax laws, offers similar relief under specific conditions.
Let’s take a quick step back and define joint tax returns.
A joint tax return is a single tax return filed by a married couple who opts to combine their income, exemptions, deductions, and credits to report their taxes together. In the United States, married couples have the option to file their taxes jointly or separately each year. Filing jointly usually provides several benefits and is often the preferred filing status for married couples.
Here’s a closer look at what it entails:
While California tax laws generally align with federal regulations, it’s crucial to understand that the California Franchise Tax Board (FTB) handles Innocent Spouse Relief requests in the state.
The process involves filing a formal request with the FTB, where you must prove that you meet the criteria for relief. These criteria typically include proving that you were unaware of the errors resulting in understated tax or that it would be unfair to hold you responsible for the tax liability.
The FTB evaluates several factors when considering your application, such as:
Qualification hinges on various factors. You may qualify if:
Additionally, there are specific time frames within which you must request this relief. Generally, you must file the request within two years after the date the IRS began collection activities against you.
Under the IRS Code 6015, there are three main types of tax relief options available. These types are designed to accommodate different situations where one spouse believes they should not be held responsible for tax liabilities due to the actions or inactions of their spouse or ex-spouse.
The three types of relief are:
2. Separation of Liability Relief (IRC 6015(c)):
3. Equitable Relief (IRC 6015(f)):
For California taxes, the FTB closely follows federal provisions and are therefore broadly comparable to the federal relief options discussed above.
When considering requesting relief, it’s important to understand the specific conditions, qualifications, and procedures for each type of relief. Typically, a thorough review of the tax situation, often with the assistance of a tax attorney, is essential to determine the most appropriate and beneficial form of relief based on tax law and your individual situation.
Navigating the complexities of Innocent Spouse Relief can be daunting. A skilled tax attorney can provide crucial guidance through the intricate process, ensuring that your application to request relief is robust, well-documented, and timely. They can help you:
If you’re facing tax liabilities due to inaccuracies on a jointly filed return, Innocent Spouse Relief could offer a way out. However, the intricacies of such claims, especially in the context of California’s tax laws, necessitate professional guidance from tax attorneys.
As an Orange County Tax Attorney dedicated to assisting clients with complex tax issues, I can help you navigate this challenging process, aiming for a resolution that protects your financial interests.
Yes, a registered domestic partnership in California does qualify for innocent spouse relief under the state’s tax laws. Individuals in a registered domestic partnership can file joint tax returns and are subject to the same responsibilities and protections, including innocent spouse relief.
The processing time can vary, but it generally takes several months. The complexity of your case and the IRS’s current backlog can affect the duration.
If your application is denied, you have the right to appeal the decision. The IRS provides instructions on how to file an appeal in the determination letter.
March 6, 2024
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