Injured/Innocent Spouse

[Lion EA]

OK, I don't need these forms very often so always get them confused.  Does someone have a short description of the difference?

 

It came up in a phone call from a client.  Before they came to me, they were already on a payment plan.  Will that mean that wife has accepted husband's debt, and neither form would work?

 

Debt arose during their marriage, from husband's business where only he did his bookkeeping.  She may be divorcing him and wants to separate herself from his debts now.

 

Any tips?

[Lee B]

As I understand it, Innocent Spouse relates to understated tax due to erroneous information that only the other

 

spouse was aware  Injured Spouse is when a potential refund on a joint return is seized and applied to the

 

other spouses debts i.e., Past Due Income Tax, Child Support, Student Loan, Overpaid  Unemployment

 

Benefits. In this case, you didn't say whether or not there was an understatement of tax due to erroneous

 

information. If the correct tax returns were filed originally, you probably don't have any relief available.

[kcjenkins]

Well, the Injured spouse is one who, for example, married him/her AFTER the tax debt was incurred, and in that case, only the funds belonging to the t/p owing the debt will be seized.  The innocent spouse is one who did not BENEFIT from the unreported income.  It's not just that one of them did not KNOW about it, if, for example, they lived in a bigger, nicer home, drove better cars, etc, than their reported income justified, the IRS is not going to buy the innocence argument.   

[Lion EA]

Thanx, folks.

 

Since coming to me (a referral from a good client) they did not have a refund and were under-withheld enough I don't think the innocent spouse would've had a refund with or without her husband.  But, she has a new job and new withholding as of mid-2014.  And, nothing had left his Schedule C bank account so did not benefit the family.

 

She was thinking about prior years, and I didn't look at those as thoroughly as I now wished as it was during the crush of tax season.

 

I'll start with the innocent spouse instructions and go from there...

[KEYWEST_RICKS]

i always thought i understood this but now i am doubting myself.

 

my client married someone in 2013.     he owes back taxes from roughly 5 years ago.

 

2013 was the first year they filed joint return

 

i included an injured spouse form with the return.

 

she still has not received her refund and she claims to me that during a phone call she had with the IRS .... they informed her that she should not have filed injured spouse form with her return..... that she had to complete an innocent spouse return and submitt to the irs.

 

i dont believe that what the IRS told her is correct....... or am i the one missing the boat here

[Jack from Ohio]

i always thought i understood this but now i am doubting myself.

 

my client married someone in 2013.     he owes back taxes from roughly 5 years ago.

 

2013 was the first year they filed joint return

 

i included an injured spouse form with the return.

 

she still has not received her refund and she claims to me that during a phone call she had with the IRS .... they informed her that she should not have filed injured spouse form with her return..... that she had to complete an innocent spouse return and submitt to the irs.

 

i dont believe that what the IRS told her is correct....... or am i the one missing the boat here

I have clients filing injured spouse that took 4 months to receive the refund.  I always file the 8379 with the return.

The IRS person is ill-informed and not properly trained.  This has become the standard for phone help at the IRS.

 

Tell your client to stop calling the IRS and be patient.

 

[kcjenkins]

i always thought i understood this but now i am doubting myself.

 

my client married someone in 2013.     he owes back taxes from roughly 5 years ago.

 

2013 was the first year they filed joint return

 

i included an injured spouse form with the return.

 

she still has not received her refund and she claims to me that during a phone call she had with the IRS .... they informed her that she should not have filed injured spouse form with her return..... that she had to complete an innocent spouse return and submitt to the irs.

 

i dont believe that what the IRS told her is correct....... or am i the one missing the boat here

You were right.    

[WITAXLADY]

New ;law for Innocent spouse in last 2 years - can apply and file from here on out to be not a part of the payment.. Form 8857 

It probably will not help the back years but forward it does.

Am in the process of one right now since I found out about this from a WI seminar with Scioli and Associates out of Saginaw MI - excellent firm for this and OIC...

[Lion EA]

This has been a great update on this topic.  Thanx, all.  

[michaelmars]

I just got my decision in my NY tax case involving my client being innocent.  The hearing officer agreed with us and cancelled all assessments against my client.  this was for sales tax and the spouse put the business in her name since he had partners in his main business and wasn't allowed to own another company in a similar field. 

[bertrans]

i always thought i understood this but now i am doubting myself.

 

my client married someone in 2013.     he owes back taxes from roughly 5 years ago.

 

2013 was the first year they filed joint return

 

i included an injured spouse form with the return.

 

she still has not received her refund and she claims to me that during a phone call she had with the IRS .... they informed her that she should not have filed injured spouse form with her return..... that she had to complete an innocent spouse return and submitt to the irs.

 

i dont believe that what the IRS told her is correct....... or am i the one missing the boat here

As other commenters have noted, the 'advice' given by the IRS fellow was plainly and simply wrong and bespeaks someone who wouldn't know the difference between a bowl of jelly and apoisonous  jelly fish. The provisions of innocent spouse necessarily presuppose the existence of a marriage; therefore, whatever the spouse may have done prior to the marriage is moot. Now, as to injured spouse: although this shouldn't happen, nevertheless, if A marries B in 2013 (jointly), and A has liabilities that precede the marriage, the IRS computer is programmed to offset any refund from spouse B (after marriage) to spouse A's liabilities: spouse B should indeed file an 8379 with the original joint return (as a pre-emptive matter) - AND THE IRS MUST RESTORE THE OFFSET.  PS: I don't use caps often - but the galloping ignorance on the part of the IRS person simply frosts my drawers. Yes, as someone here observed, it is getting worse, much worse.