How to Qualify for Equitable Relief

Equitable relief is one of the ways you can get tax relief from spousal liability. Spousal liability occurs when, for one reason or another, you become liable for your spouse's unpaid taxes. Equitable relief is designed to provide tax relief from spousal liability if you can't get tax relief under innocent spouse relief or separation of liability. Equitable liability has broader terms and more options, but it also comes with it's own qualification requirements. If you can't meet at all of them, you will have to pay your husband's unpaid taxes out of your own pocket.

What Tax Relief Equitable Relief Provides

The equitable relief frees you from the obligation to pay any of your spouse's unpaid taxes, interest and penalties. It also includes underpaid taxes - taxes that were not paid in full. For the purposes of equitable relief, "spouse" is someone who was your spouse at the time you filled out your last tax return rather than your spouse at the time you applied for tax relief. Equitable relief may also allow you to apply for a partial refund for the tax returns you already paid.

How To Qualify For Equitable Relief

In order to qualify for equitable relief, you meet all of the following conditions. Meeting those conditions doesn't guarantee that IRS will grant you equitable relief - it will merely give you a chance to be heard. The conditions include:

  • No Alternatives--you are qualified if you aren't eligible for other forms of spousal liability relief.
  • No Defraud Schemes--you are not qualified if you and your spouse transferred assets to one another as a part of a scheme designed to defraud any third-party person, business or government agency.
  • No Tax Evasions--you are not qualified if your spouse transferred property to you for the express purpose of avoiding avoid paying taxes in full.
  • No Tax Fraud--you are not qualified if you committed fraud when you filed (or didn't file) your tax returns.
  • No Paid Spousal Liabilities--you are not qualified if you already paid the spousal liability.
  • Unfair Burden--you are qualified if you establish that, taking into account all the facts and circumstances, that it would be unfair to hold you liable for your spouse's unpaid taxes.
  • Attribution--you are qualified if the unpaid taxes can be clearly attributed to any item from your spouse. There are four exceptions to this condition. They include:
    • Community property law exception--if the item is fully or attributable or partially attributable to you solely because of the way community property law works, you qualify for this exception.
    • Improper attribution exception--if you can prove that the item should not be attributed to you, even if it’s titled in your name, you qualify for this exception. 
    • Misappropriation exception--if you did not know and had no reason to suspect that your spouse intended to misappropriated the money that was supposed to be used to pay taxes for his or her own benefit, you qualify for this exception. 
    • Abuse-- if you can show that you were the victim of abuse, and, as such, was intimidated into not challenging any aspect of your spouse’s tax return, you qualify for this exception.  

If you meet the above qualifications, you apply for tax relief by filling out IRS Form 8857. The IRS will consider all your facts and circumstances and decide whether or not you deserve equitable relief.

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