A Traditional Innocent Spouse Relief Alternative.
What happens if I don’t qualify for traditional innocent spouse relief?
Even if you asked about traditional innocent spouse relief and someone told you that didn’t qualify you may have options. Streamlined equitable relief is one of them.
Do I Qualify For Streamlined Equitable Relief?
Thankfully, unlike most tax issues figuring out if you might qualify is simple thanks to Rev. Proc 2013-34. In Rev. Proc. 2013-34 the Internal Revenue Services says that if you meet certain conditions you can make a streamlined claim. So if you are nodding your head while reading the summary below you probably qualify. A summary of those conditions is that you:
- Are divorced from the person who caused the tax issue.
- Did not know the person did not pay your tax bill.
- Did not know the person reported your taxes wrong.
- Suffer economic hardship if the IRS fails to grant relief. In fact, if you don’t have any large assets the IRS does not require you to even prove the hardship exists if:
1. You have no large assets and
2. In 2018 you make less than:
- 51,950* with 3 people in your household*
- 41,150* with 2 people in your household*
- 30,350* with 1 person in your household*
What Can I Do If I May Qualify For Streamlined Equitable Spouse Relief?
Again, this is a cliff notes version as each of these factors has quite a bit of nuance from various court cases. This is especially true for the items related to the “knowledge” factor. Furthermore, significant case history exists around the topic of what constitutes “knowledge”. The reason for this is that IRS frequently argues that taxpayers “should have known” that their spouse didn’t pay or reported their tax liability incorrectly. Critical to a successful claim is the knowledge and experience that allows you to avoid and defend yourself against the possible IRS attack on your credibility.
Why Filing An Innocent Spouse Claim Isn’t Like Filing My Taxes Online
We advise getting experienced professional help because in many cases, you only have 1 chance to submit a claim correctly for innocent spouse or equitable relief. An incorrectly prepared claim can easily cost you tens to hundreds of thousands of dollars.
Additionally, on more than one occasion, a federal judge has chastised the IRS for not following their own guidelines while reviewing claims. A professional will ensure that your one chance to ask for relief is done correctly and that the IRS properly reviews it.
Finally, state and district rules about Innocent Spouse Relief and Equitable Relief can vary. Due to the Golsen rule, the court can rule differently about two identical claims because the case history in their federal districts is different. While this is unlikely to happen the issue is worth being aware of.
A professional will help you coordinate multiple claims so they are submitted in the most advantageous order as well as advise you on any district-specific issues.
What Can I Do Next?
Experienced ethical practitioners will offer a low or no cost review of your situation. The review process will help you understand if your claim is likely to succeed and what documents and materials you need to gather to ensure your claim progresses smoothly.
What Can I Do If I Don’t Qualify For Streamlined Equitable Relief?
First of all, don’t worry! You may still qualify for nonstreamlined or normal equitable relief. Check back in a week or two and we’ll have an article about it ready for you.
*This number is higher in Alaska and Hawaii because of the cost of living. Furthermore, the amount of allowable income grows as your household size does. Here is a link to the full list for of 250% FPL allowable incomes provided by the Maine Division of Disease Prevention. The allowable income is based off 250% of the Federal Poverty Guidelines and is the same for all 48 of the continental US states.