A married couple filed a joint return for one year that did not include the wife’s Social Security benefits. These benefits resulted from her being formally classified as disabled. In the following year, the benefits were reported, but they didn’t pay the resulting tax. She filed for innocent spouse relief.
The Tax Court denied her relief (Bridgette Ogden, TC Memo 2019-88). Generally, married persons filing joint returns are jointly and severally liable for the taxes, interest, and penalties attributable to those returns. However, under certain conditions, one spouse may seek relief from this liability. There are three forms of innocent spouse relief: (1) basic relief, (2) separately liability relief, and (3) equitable relief. For purposes of the first two types of innocent spouse relief, the relief must be requested not later than two years from the date that the IRS begins collection action. She failed to timely file for relief, so she did not qualify under either (1) or (2).
For equitable relief, this time limit does not apply, but other factors do. A key factor is that the liability must be attributable in part or in full to the non-requesting spouse. Here, the liability was entirely attributable to the requesting spouse. It was her Social Security benefits that triggered the tax liability. Thus, no relief was allowed in this situation.