Spouses who file a joint income tax return are both jointly and severally liable for the taxes associated with the return, both federally and at the state level. If the joint tax liability is not paid, or additional tax is assessed through an audit, the Internal Revenue Service (IRS) and state taxing authority (the South Carolina Department of Revenue in the case of South Carolina) will pursue both spouses in an effort to collect the tax. One spouse may have believed that the other spouse had paid the taxes, or that all income and deductions were properly reported, only to find out a few years later the taxes were not paid or reported correctly.
In certain instances the law allows an “innocent spouse” to be relieved of joint liability for a tax debt. An innocent spouse must file a request for relief from a joint liability. Separate requests must be filed for federal and state liabilities. The South Carolina Department of Revenue recently issued a news release to remind taxpayers that innocent spouse relief is available in South Carolina.
South Carolina follows the same standards used by the IRS to determine whether to grant innocent spouse relief. The DOR news release states innocent spouse relief is available in the following circumstances:
- Innocent spouse relief: Applies to situations where the tax due was understated on a return because of an incorrect item, such as income, a deduction, or credit that is inaccurately reported. The requesting spouse did not know when they signed the return that information was wrong or understated. The requesting spouse also may have been coerced to sign the return.
- Separation of liability relief: Applies to situations in which one spouse passed away, or a couple divorced, separated, or lived apart at all times during the past year. This relief involves separating the tax liability between the spouses.
- Equitable relief: Applies to situations where tax is due, but one spouse may have had a much higher income than the other. This request is for a tax bill that appropriately matches the income of the spouse applying for relief.
The relief standards and time periods within which a request must be filed are different for each of the three categories of innocent spouse relief. For example, taxpayers generally have two years to file a request for relief under categories 1 and 2 but have a potentially unlimited time period to file a request under category 3.
Form SC8857, Request for Innocent Spouse Relief, is used to file an innocent spouse relief request and DOR states it will respond to a request within 10 business days. Taxpayers should carefully consider the basis upon which to request relief taking into account all facts and circumstances. A well-articulated innocent spouse relief request is often successful. If relevant facts are not well-articulated a request for innocent spouse relief request may be denied and the requesting spouse will continue to be liable for the joint tax liabilities.
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