In the world of taxes, married couples are encouraged to file jointly on their income tax return. By doing this, the government provides couples with several benefits over married couples who file separately. However, filing jointly means one spouse’s return may be used to pay the other spouse’s accumulated debts. If you think this has happened to you, you may be entitled to injured spouse relief.
Why Injured Spouse Relief Exists
When spouses file a joint tax return, federal tax law considers them jointly and severally liable for the entire tax liability. In other words, each spouse is individually liable for the debt of either or both of them on the tax return. But, as explained below, the government can use a tax refund to offset an amount owed for certain debts. To save a non-debtor spouse from having his or her debt allocated to pay down the other spouse’s debt, the Internal Revenue Service allows the injured (non-debtor) spouse the opportunity to seek to avoid or recoup that offset.
By understanding how injured spouse relief can work, taxpayers have a head start in determining whether they are eligible for such relief.
What Is Injured Spouse Relief?
The injured spouse rule allows one spouse to apply for a return of his or her tax refund that was applied to the spouse’s outstanding federal or state tax debt. This is called offsetting, or garnishing, the non-debtor spouse’s debt. The spouse whose refund is used to pay the other’s debt is called the “injured spouse” and may request a refund of his or her share of the joint refund that was applied to the spouse’s debt. The injured spouse rule applies to various types of debt, including the following:
- Past-due federal taxes;
- Past-due state income taxes;
- State unemployment compensation debts;
- Delinquent child support obligations; and
- Federal nontax debt such as student loans.
How to File for an Injured Spouse Allocation
An injured spouse may file IRS Form 8379 to recoup an injured spouse allocation either with a jointly filed tax return or upon learning after filing that the injured spouse’s refund was used to offset the other spouse’s debt. When seeking to recoup a garnished refund, the injured spouse must file IRS Form 8379 by the later of the following:
- Three years from the due date of the original tax return under which the injured spouse’s refund was garnished (including extensions); and
- Two years from the date taxes were paid that were later offset.
The Difference between Injured Spouse and Innocent Spouse Relief
Injured spouse and innocent spouse relief both arise out of jointly filed tax returns, but the two are quite different. Whereas the injured spouse rule allows a non-debtor spouse a chance to avoid or recoup garnishment of that spouse’s tax refund, an innocent spouse seeks to avoid liability for the other spouse’s underreporting of income or underpayment of taxes. To receive innocent spouse relief, the requesting spouse must file IRS Form 8857 and demonstrate all of the following criteria:
- The error on a previously filed joint tax return was caused solely by the non-requesting spouse;
- The spouse seeking relief had no idea of the error and no reason to know of it at the time of filing; and
- Holding the requesting spouse responsible for the error would be unfair.
Alternatively, an injured spouse is seeking a refund for the allocation of his or her tax return to offset the other spouse’s debt.
Learn How a Camden & Meridew Indiana Tax Lawyer Can Help
Federal and state tax laws can be daunting with the various worksheets, forms, and procedures. If you or a loved one believe you may qualify for injured spouse relief, you need an Indiana tax lawyer who is experienced with such claims and broader tax matters. To maximize your chance for success, contact experienced Indiana tax lawyer and trial attorney Julie Camden at Camden & Meridew, P.C. To set up a consultation, call 317-770-000 or fill out the firm’s online contact form. We are happy to help!