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H&rblock Index A Additional child tax credit, Additional child tax credit. H&rblock Additional Medicare Tax, What's New, Useful Items - You may want to see:, Additional Medicare Tax. H&rblock , Additional Medicare Tax. H&rblock , Additional Medicare Tax. H&rblock , Additional Medicare Tax. H&rblock , Additional Medicare Tax. H&rblock , Additional Medicare Tax Aliens Nonresident (see specific possession) Resident (see specific possession) American Samoa, American Samoa, Double Taxation Form 4563, Form 4563. H&rblock Armed forces, U. H&rblock S. H&rblock Bona fide residence, Special rule for members of the U. H&rblock S. H&rblock Armed Forces. H&rblock Armed Forces, U. H&rblock S. H&rblock Earned income credit, Earned income credit. H&rblock , U. H&rblock S. H&rblock Armed Forces. H&rblock Source of income, U. H&rblock S. H&rblock Armed Forces. H&rblock Spouse, Special rule for civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock Assistance (see Tax help) Awards and prizes, Scholarships, Fellowships, Grants, Prizes, and Awards B Bankruptcy cases, Chapter 11, Chapter 11 Bankruptcy cases. H&rblock Bona fide residence, Bona Fide Residence, Worldwide gross income. H&rblock Closer connection, Closer Connection, Exception for Year of Move Year of move, Exception for Year of Move, Special Rules in the Year of a Move, Puerto Rico Presence test, Presence Test, Charitable sports event, Charitable Sports Event Child, defined, Days of presence in a possession. H&rblock Nonresident aliens, Special rule for nonresident aliens. H&rblock Possession, days in, Days of presence in a possession. H&rblock Qualifying medical treatment, Qualifying Medical Treatment Significant connection, Significant Connection, Student, Student U. H&rblock S. H&rblock , days in, Days of presence in the United States. H&rblock Reporting change in residency status, Reporting a Change in Bona Fide Residence, Worldwide gross income. H&rblock Penalty for not reporting, Penalty for Not Filing Form 8898 Tax home, Tax Home, Year of Move Exceptions, Exceptions Government officials, Students and Government Officials Seafarers, Seafarers Students, Students and Government Officials Year of move, Year of Move, Special Rules in the Year of a Move, Puerto Rico Tests to meet, Bona Fide Residence U. H&rblock S. H&rblock Armed Forces, Special rule for members of the U. H&rblock S. H&rblock Armed Forces. H&rblock Year of move, Special Rules in the Year of a Move, Puerto Rico Puerto Rico, Puerto Rico C Change in residency status, reporting, Reporting a Change in Bona Fide Residence, Worldwide gross income. H&rblock Penalty for not reporting, Penalty for Not Filing Form 8898 Change of address, Reminders Charitable sports event, Charitable Sports Event Child tax credit, additional, Additional child tax credit. H&rblock Child, defined, Days of presence in a possession. H&rblock Closer connection, Closer Connection, Exception for Year of Move Year of move, Exception for Year of Move, Special Rules in the Year of a Move, Puerto Rico CNMI tax return, Nonresident Alien (Other Than a Bona Fide Resident of the CNMI) Commonwealth of Puerto Rico, The Commonwealth of Puerto Rico, Double Taxation Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of the Northern Mariana Islands, Double Taxation Form 5074, Form 5074. H&rblock Compensation for labor or personal services, Compensation for Labor or Personal Services, Pensions. H&rblock Alternative basis, Alternative basis. H&rblock Multi-year compensation, Multi-year compensation. H&rblock Time basis, Time basis. H&rblock Competent Authority Assistance, Competent Authority Assistance How to make your request, How to make your request. H&rblock Credit or Refund File a claim for credit or refund of any overpayment sought, Credit or Refund Credits Earned income, Reminders, Earned income credit. H&rblock Foreign tax, U. H&rblock S. H&rblock Government employees. H&rblock , Moving expense deduction. H&rblock , Foreign Tax Credit if Possession Income Is Excluded D Deductions IRA contribution, Individual retirement arrangement (IRA) deduction. H&rblock Moving expenses U. H&rblock S. H&rblock return, Moving expense deduction. H&rblock Personal exemptions, Personal Exemptions Self-employment tax, one-half of, Self-employment tax deduction. H&rblock Standard deduction, Standard Deduction Deductions if Possession Income Is Excluded, Deductions if Possession Income Is Excluded Dispositions of certain property, special rules for, Special Rules for Gains From Dispositions of Certain Property Dividends, Dividends. H&rblock Double taxation, inconsistent tax treatment Mutual agreement procedure, Double Taxation E Earned income credit, Reminders, Earned income credit. H&rblock Effectively connected income, Effectively Connected Income Estimated tax payments, Estimated tax payments. H&rblock , Estimated tax payments. H&rblock , Estimated tax payments. H&rblock , Estimated tax payments. H&rblock , Estimated tax payments. H&rblock , Estimated Tax Exemptions, deduction for, Personal Exemptions Extension of time to file U. H&rblock S. H&rblock return, Extension of Time To File USVI, Extension of time to file. H&rblock F Filing requirements American Samoa, American Samoa, Double Taxation Form 4563, Form 4563. H&rblock CNMI, The Commonwealth of the Northern Mariana Islands, Double Taxation Form 5074, Form 5074. H&rblock Guam, Guam, Double Taxation Form 5074, Form 5074. H&rblock Possessions, Filing Information for Individuals in Certain U. H&rblock S. H&rblock Possessions, Double Taxation Puerto Rico, The Commonwealth of Puerto Rico, Double Taxation U. H&rblock S. H&rblock return, Filing Requirement if Possession Income Is Excluded USVI, The U. H&rblock S. H&rblock Virgin Islands, Double Taxation Form 1040INFO, Form 1040INFO. H&rblock Form 4868, Extension of time to file. H&rblock Form 8689, Form 8689. H&rblock Foreign tax credit, Foreign Tax Credit if Possession Income Is Excluded Form 1040-ES, Estimated Tax 1040-PR, Additional child tax credit. H&rblock 1040-SS, Self-employment tax. H&rblock , Additional child tax credit. H&rblock , Self-employment tax. H&rblock , Self-employment tax. H&rblock , Self-employment tax. H&rblock 1040INFO, Form 1040INFO. H&rblock 1040NR, Nonresident alien. H&rblock , Nonresident alien. H&rblock , Nonresident Alien (Other Than a Bona Fide Resident of the CNMI), Nonresident Alien (Other Than a Bona Fide Resident of Guam), Nonresident Alien (Other Than a Bona Fide Resident of the USVI) 1116, U. H&rblock S. H&rblock Government employees. H&rblock , Moving expense deduction. H&rblock , Foreign Tax Credit if Possession Income Is Excluded 3903, Moving expense deduction. H&rblock , Moving expense deduction. H&rblock , Moving expense deduction. H&rblock , Moving expense deduction. H&rblock , Moving expense deduction. H&rblock , Moving expense deduction. H&rblock 4563, Form 4563. H&rblock 4563, illustrated example, Illustrated Example of Form 4563, Line 15. H&rblock , 4868, Extension of time to file. H&rblock , Automatic 6-Month Extension 5074, Form 5074. H&rblock , Moving expense deduction. H&rblock , Form 5074. H&rblock , Moving expense deduction. H&rblock 5074, illustrated example, Illustrated Example of Form 5074, Part III. H&rblock , 8689, Form 8689. H&rblock 8689, illustrated example, Illustrated Example of Form 8689, Part IV. H&rblock , 8822, Reminders 8898, Reporting a Change in Bona Fide Residence, Penalty for Not Filing Form 8898 Schedule A (Form 1040), Itemized Deductions Schedule SE (Form 1040), Self-Employment Tax Free tax services, Free help with your tax return. H&rblock Fringe benefits, Certain fringe benefits sourced on a geographical basis. H&rblock G Government employees, U. H&rblock S. H&rblock (see specific possession) Grants, Scholarships, Fellowships, Grants, Prizes, and Awards Guam, Guam, Double Taxation Form 5074, Form 5074. H&rblock H Help (see Tax help) I Income Awards and prizes, Scholarships, Fellowships, Grants, Prizes, and Awards Effectively connected income, Effectively Connected Income Grants, Scholarships, Fellowships, Grants, Prizes, and Awards Investments, Investment Income, Royalties. H&rblock Labor or personal services, Compensation for Labor or Personal Services, Pensions. H&rblock Pensions, Pensions. H&rblock Sales or other dispositions of property, Sales or Other Dispositions of Property, Special Rules for Gains From Dispositions of Certain Property Scholarships and fellowships, Scholarships, Fellowships, Grants, Prizes, and Awards Services performed partly within a possession, Services performed partly inside and partly outside a relevant possession. H&rblock , Alternative basis. H&rblock Source of, Possession Source Income U. H&rblock S. H&rblock Armed Forces, U. H&rblock S. H&rblock Armed Forces. H&rblock U. H&rblock S. H&rblock income rule, U. H&rblock S. H&rblock income rule. H&rblock Income from American Samoa or Puerto Rico excluded. H&rblock , Income from American Samoa or Puerto Rico excluded. H&rblock Deductions if income from American Samoa or Puerto Rico excluded, Deductions if Possession Income Is Excluded Interest income, Interest income. H&rblock Inventory Sales or other dispositions of, Inventory. H&rblock Investment income, Investment Income, Royalties. H&rblock IRA deduction, Individual retirement arrangement (IRA) deduction. H&rblock Itemized deductions, Itemized Deductions M Medical treatment, qualifying, Qualifying Medical Treatment Moving expense deduction U. H&rblock S. H&rblock return, Moving expense deduction. H&rblock N Net Investment Income Tax, What's New, Useful Items - You may want to see:, Net Investment Income Tax. H&rblock , Net Investment Income Tax. H&rblock , Net Investment Income Tax Nonresident alien (see specific possession) Northern Mariana Islands (CNMI), The Commonwealth of the Northern Mariana Islands, Double Taxation P Paying your taxes, Paying Your Taxes Penalty Failure to report change in residency status, Penalty for Not Filing Form 8898 Pension income, Pensions. H&rblock Permanent home, Permanent home. H&rblock Personal exemptions, deduction for, Personal Exemptions Personal property Sales or other dispositions of, Personal property. H&rblock Personal service income, Compensation for Labor or Personal Services, Pensions. H&rblock Possession source income, Possession Source Income, Effectively Connected Income Awards and prizes, Scholarships, Fellowships, Grants, Prizes, and Awards Effectively connected income, Effectively Connected Income Grants, Scholarships, Fellowships, Grants, Prizes, and Awards Investment income, Investment Income, Royalties. H&rblock Labor or personal services, Compensation for Labor or Personal Services, Pensions. H&rblock Pensions, Pensions. H&rblock Sales or other dispositions of property, Sales or Other Dispositions of Property, Special Rules for Gains From Dispositions of Certain Property Scholarships and fellowships, Scholarships, Fellowships, Grants, Prizes, and Awards Services performed partly within a possession, Services performed partly inside and partly outside a relevant possession. H&rblock , Alternative basis. H&rblock U. H&rblock S. H&rblock Armed Forces, U. H&rblock S. H&rblock Armed Forces. H&rblock U. H&rblock S. H&rblock income rule, U. H&rblock S. H&rblock income rule. H&rblock Possessions, list of, Introduction Presence test, Presence Test, Charitable sports event, Charitable Sports Event Child, defined, Days of presence in a possession. H&rblock Nonresident aliens, Special rule for nonresident aliens. H&rblock Possession, days in, Days of presence in a possession. H&rblock Qualifying medical treatment, Qualifying Medical Treatment Significant connection, Significant Connection, Permanent home, Permanent home. H&rblock Student, Student U. H&rblock S. H&rblock , days in, Days of presence in the United States. H&rblock Prizes, Scholarships, Fellowships, Grants, Prizes, and Awards Publications (see Tax help) Puerto Rico, The Commonwealth of Puerto Rico, Double Taxation Additional child tax credit, Additional child tax credit. H&rblock Bona fide residence Year of move, Puerto Rico Q Qualifying medical treatment, Qualifying Medical Treatment R Real property Sales or other dispositions of, Real property. H&rblock Reminders Earned income credit (EIC). H&rblock , Reminders Electronic filing. H&rblock , Reminders Rental income, Rental income. H&rblock Resident alien (see specific possession) Royalty income, Royalties. H&rblock S Scholarships and fellowships, Scholarships, Fellowships, Grants, Prizes, and Awards Self-employment tax U. H&rblock S. H&rblock return, Self-Employment Tax Self-employment tax deduction, Self-employment tax deduction. H&rblock Services performed partly within a possession, Services performed partly inside and partly outside a relevant possession. H&rblock , Alternative basis. H&rblock Significant connection, Significant Connection, Source of income, Possession Source Income, Effectively Connected Income Awards and prizes, Scholarships, Fellowships, Grants, Prizes, and Awards Effectively connected income, Effectively Connected Income Grants, Scholarships, Fellowships, Grants, Prizes, and Awards Investment income, Investment Income, Royalties. H&rblock Labor or personal services, Compensation for Labor or Personal Services, Pensions. H&rblock Pensions, Pensions. H&rblock Sales or other dispositions of property, Sales or Other Dispositions of Property, Special Rules for Gains From Dispositions of Certain Property Scholarships and fellowships, Scholarships, Fellowships, Grants, Prizes, and Awards Services performed partly within a possession, Services performed partly inside and partly outside a relevant possession. H&rblock , Alternative basis. H&rblock U. H&rblock S. H&rblock Armed Forces, U. H&rblock S. H&rblock Armed Forces. H&rblock U. H&rblock S. H&rblock income rule, U. H&rblock S. H&rblock income rule. H&rblock Special rules for filing (see specific possession) Special rules for gains from dispositions of certain property, Special Rules for Gains From Dispositions of Certain Property Sports event, charitable, Charitable Sports Event Standard deduction, Standard Deduction Statement of Specified Foreign Financial Assets, Form 8938,, Reminders Student, Student T Tables U. H&rblock S. H&rblock filing requirements for most taxpayers (Table 4-1), U. H&rblock S. H&rblock source of income (Table 2-1), Table 2-1. H&rblock General Rules for Determining U. H&rblock S. H&rblock Source of Income Tax help, How To Get Tax Help Tax home, Tax Home, Year of Move Exceptions, Exceptions Government officials, Students and Government Officials Seafarers, Seafarers Students, Students and Government Officials Year of move, Year of Move, Special Rules in the Year of a Move, Puerto Rico Taxpayer Clinics, Low Income Taxpayer Clinics, Low Income Taxpayer Clinics (LITCs). H&rblock TTY/TDD information, How To Get Tax Help U U. H&rblock S. H&rblock Armed Forces Bona fide residence, Special rule for members of the U. H&rblock S. H&rblock Armed Forces. H&rblock Earned income credit, Earned income credit. H&rblock , U. H&rblock S. H&rblock Armed Forces. H&rblock Source of income, U. H&rblock S. H&rblock Armed Forces. H&rblock Spouse, Special rule for civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock , Civilian spouse of active duty member of the U. H&rblock S. H&rblock Armed Forces. H&rblock U. H&rblock S. H&rblock Government employees (see specific possession) U. H&rblock S. H&rblock income rule, U. H&rblock S. H&rblock income rule. H&rblock U. H&rblock S. H&rblock return with excluded income, Deductions if Possession Income Is Excluded U. H&rblock S. H&rblock return, possession income excluded on, Special Rules for Completing Your U. H&rblock S. H&rblock Tax Return, Foreign Tax Credit if Possession Income Is Excluded Credits Earned income credit, Earned income credit. H&rblock Foreign tax credit, Foreign Tax Credit if Possession Income Is Excluded Deductions IRA contribution, Individual retirement arrangement (IRA) deduction. H&rblock Itemized deductions, Itemized Deductions Moving expenses, Moving expense deduction. H&rblock Personal exemptions, Personal Exemptions Self-employment tax, one-half of, Self-employment tax deduction. H&rblock Standard deduction, Standard Deduction U. H&rblock S. H&rblock taxation of possession income, to get information on, Introduction U. H&rblock S. H&rblock Virgin Islands (USVI), The U. H&rblock S. H&rblock Virgin Islands, Double Taxation Form 1040INFO, Form 1040INFO. H&rblock Form 4868, Extension of time to file. H&rblock Form 8689, Form 8689. H&rblock V Virgin Islands, U. H&rblock S. H&rblock , The U. H&rblock S. H&rblock Virgin Islands, Double Taxation W When to file U. H&rblock S. H&rblock return, When To File, Extension beyond 2 months. H&rblock Where To File U. H&rblock S. H&rblock return, Where To File Which return to file (see specific possession) Who must file U. H&rblock S. H&rblock return, Filing Requirement if Possession Income Is Excluded Prev  Up     Home   More Online Publications
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Abusive Return Preparer - Criminal Investigation (CI)

Overview - Abusive Return Preparer
Criminal Investigation Return Preparer Program (RPP) establishes procedures to foster compliance by identifying, investigating and prosecuting abusive return preparers

Definition - Abusive Return Preparer
A Return Preparer is defined as any person (including a partnership or corporation) who prepares for compensation all or a substantial portion of a tax return or claim for refund under the income tax provisions of the Internal Revenue Code

Return Preparation and Electronic Filing - Abusive Return Preparer
The advent of electronic filing of income tax returns by electronic return transmitters has provided a new mechanism for unscrupulous preparers to commit fraud

Tactics Used by Dishonest Abusive Return Preparers
Dishonest tax preparers use a variety of methods to formulate fraudulent and illegal deductions reducing taxable income

Helpful Hints when choosing a Return Preparer to ensure you don't hire an Abusive Return Preparer
When preparing your tax return remember ...

Statistical Data - Abusive Return Preparers
Enforcement statistics on investigations initiated, prosecutions recommended, indictments, sentencings and months to serve in prison.

Examples of Abusive Return Preparer Investigations
Examples have been written from public record documents filed in the district courts where the case was prosecuted.

Reporting Fraud and Abuse Within the IRS E-File Program
You should report fraudulent or abusive returns, including those with questionable Forms W2

 


Criminal Enforcement Home Page

How to Report Suspected Tax Fraud Activities

Page Last Reviewed or Updated: 30-Oct-2013

The H&rblock

H&rblock Publication 971 - Main Content Table of Contents How To Request ReliefException for agreements relating to TEFRA partnership proceedings. H&rblock The IRS Must Contact Your Spouse or Former Spouse Tax Court Review of Request Community Property LawsRelief for Married Persons Who Did Not File Joint Returns Innocent Spouse ReliefUnderstated Tax Erroneous Items Actual Knowledge or Reason To Know Indications of Unfairness for Innocent Spouse Relief Separation of Liability ReliefLimitations on Relief Equitable ReliefConditions for Getting Equitable Relief Factors for Determining Whether To Grant Equitable Relief RefundsProof Required Refunds Under Equitable Relief Limit on Amount of Refund Filled-in Form 8857 Flowcharts How To Request Relief File Form 8857 to ask the IRS for the types of relief discussed in this publication. H&rblock If you are requesting relief for more than three tax years, you must file an additional Form 8857. H&rblock The IRS will review your Form 8857 and let you know if you qualify. H&rblock A completed Form 8857 is shown later. H&rblock When to file Form 8857. H&rblock   You should file Form 8857 as soon as you become aware of a tax liability for which you believe only your spouse or former spouse should be held responsible. H&rblock The following are some of the ways you may become aware of such a liability. H&rblock The IRS is examining your tax return and proposing to increase your tax liability. H&rblock The IRS sends you a notice. H&rblock   You must file Form 8857 no later than two years after the date on which the IRS first attempted to collect the tax from you that occurs after July 22, 1998. H&rblock (But see the exceptions below for different filing deadlines that apply. H&rblock ) For this reason, do not delay filing because you do not have all the documentation. H&rblock   Collection activities that may start the 2-year period are: The IRS offset your income tax refund against an amount you owed on a joint return for another year and the IRS informed you about your right to file Form 8857. H&rblock The filing of a claim by the IRS in a court proceeding in which you were a party or the filing of a claim in a proceeding that involves your property. H&rblock This includes the filing of a proof of claim in a bankruptcy proceeding. H&rblock The filing of a suit by the United States against you to collect the joint liability. H&rblock The issuance of a section 6330 notice, which notifies you of the IRS' intent to levy and your right to a collection due process (CDP) hearing. H&rblock The collection-related notices include, but are not limited to, Letter 11 and Letter 1058. H&rblock Exception for equitable relief. H&rblock   On July 25, 2011, the IRS issued Notice 2011-70 (available at www. H&rblock irs. H&rblock gov/irb/2011-32_IRB/ar11. H&rblock html) expanding the amount of time to request equitable relief. H&rblock The amount of time to request equitable relief depends on whether you are seeking relief from a balance due, seeking a credit or refund, or both: Balance Due – Generally, you must file your request within the time period the IRS has to collect the tax. H&rblock Generally, the IRS has 10 years from the date the tax liability was assessed to collect the tax. H&rblock In certain cases, the 10-year period is suspended. H&rblock The amount of time the suspension is in effect will extend the time the IRS has to collect the tax. H&rblock See Pub. H&rblock 594, The IRS Collection Process, for details. H&rblock Credit or Refund – Generally, you must file your request within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. H&rblock But you may have more time to file if you live in a federally declared disaster area or you are physically or mentally unable to manage your financial affairs. H&rblock See Pub. H&rblock 556, Examination of Returns, Appeal Rights, and Claims for Refund, for details. H&rblock Both a Balance Due and a Credit or Refund – If you are seeking a refund of amounts you paid and relief from a balance due over and above what you have paid, the time period for credit or refund will apply to any payments you have made, and the time period for collection of a balance due amount will apply to any unpaid liability. H&rblock Exception for relief based on community property laws. H&rblock   If you are requesting relief based on community property laws, a different filing deadline applies. H&rblock See Relief from liability arising from community property law discussed later under Community Property Laws . H&rblock Form 8857 filed by or on behalf of a decedent. H&rblock   An executor (including any other duly appointed representative) may pursue a Form 8857 filed during the decedent's lifetime. H&rblock An executor (including any other duly appointed representative) may also file Form 8857 as long as the decedent satisfied the eligibility requirements while alive. H&rblock For purposes of separation of liability relief (discussed later), the decedent's marital status is determined on the earlier of the date relief was requested or the date of death. H&rblock Situations in which you are not entitled to relief. H&rblock   You are not entitled to innocent spouse relief for any tax year to which the following situations apply. H&rblock In a final decision dated after July 22, 1998, a court considered whether to grant you relief from joint liability and decided not to do so. H&rblock In a final decision dated after July 22, 1998, a court did not consider whether to grant you relief from joint liability, but you meaningfully participated in the proceeding and could have asked for relief. H&rblock You entered into an offer in compromise with the IRS. H&rblock You entered into a closing agreement with the IRS that disposed of the same liability for which you want to seek relief. H&rblock Exception for agreements relating to TEFRA partnership proceedings. H&rblock   You may be entitled to relief, discussed in (4) earlier, if you entered into a closing agreement for both partnership items and nonpartnership items, while you were a party to a pending TEFRA partnership proceeding. H&rblock (TEFRA is an acronym that refers to the “Tax Equity and Fiscal Responsibility Act of 1982” that prescribed the tax treatment of partnership items. H&rblock ) You are not entitled to relief for the nonpartnership items, but you will be entitled to relief for the partnership items (if you otherwise qualify). H&rblock Transferee liability not affected by innocent spouse relief provisions. H&rblock   The innocent spouse relief provisions do not affect tax liabilities that arise under federal or state transferee liability or property laws. H&rblock Therefore, even if you are relieved of the tax liability under the innocent spouse relief provisions, you may remain liable for the unpaid tax, interest, and penalties to the extent provided by these laws. H&rblock Example. H&rblock Herb and Wanda timely filed their 2008 joint income tax return on April 15, 2009. H&rblock Herb died in March 2010, and the executor of Herb's will transferred all of the estate's assets to Wanda. H&rblock In August 2010, the IRS assessed a deficiency for the 2008 return. H&rblock The items causing the deficiency belong to Herb. H&rblock Wanda is relieved of the deficiency under the innocent spouse relief provisions, and Herb's estate remains solely liable for it. H&rblock However, the IRS may collect the deficiency from Wanda to the extent permitted under federal or state transferee liability or property laws. H&rblock The IRS Must Contact Your Spouse or Former Spouse By law, the IRS must contact your spouse or former spouse. H&rblock There are no exceptions, even for victims of spousal abuse or domestic violence. H&rblock We will inform your spouse or former spouse that you filed Form 8857 and will allow him or her to participate in the process. H&rblock If you are requesting relief from joint and several liability on a joint return, the IRS must also inform him or her of its preliminary and final determinations regarding your request for relief. H&rblock However, to protect your privacy, the IRS will not disclose your personal information (for example, your current name, address, phone number(s), information about your employer, your income or assets) or any other information that does not relate to making a determination about your request for relief from liability. H&rblock If you petition the Tax Court (explained below), your spouse or former spouse may see your personal information. H&rblock Tax Court Review of Request After you file Form 8857, you may be able to petition (ask) the United States Tax Court to review your request for relief in the following two situations. H&rblock The IRS sends you a final determination letter regarding your request for relief. H&rblock You do not receive a final determination letter from the IRS within six months from the date you filed Form 8857. H&rblock If you seek equitable relief for an underpaid tax, you will be able to get a Tax Court review of your request only if the tax arose or remained unpaid on or after December 20, 2006. H&rblock The United States Tax Court is an independent judicial body and is not part of the IRS. H&rblock You must file a petition with the United States Tax Court in order for it to review your request for relief. H&rblock You must file the petition no later than the 90th day after the date the IRS mails its final determination notice to you. H&rblock If you do not file a petition, or you file it late, the Tax Court cannot review your request for relief. H&rblock You can get a copy of the rules for filing a petition by writing to the Tax Court at the following address:    United States Tax Court 400 Second Street, NW Washington, DC 20217 Or you can visit the Tax Court's website at www. H&rblock ustaxcourt. H&rblock gov Community Property Laws You must generally follow community property laws when filing a tax return if you are married and live in a community property state. H&rblock Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. H&rblock Generally, community property laws require you to allocate community income and expenses equally between both spouses. H&rblock However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. H&rblock Relief for Married Persons Who Did Not File Joint Returns Married persons who live in community property states, but who did not file joint returns, have two ways to get relief. H&rblock Relief From Liability Arising From Community Property Law You are not responsible for the tax relating to an item of community income if all the following conditions exist. H&rblock You did not file a joint return for the tax year. H&rblock You did not include the item of community income in gross income. H&rblock The item of community income you did not include is one of the following: Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee. H&rblock Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor. H&rblock Your spouse's (or former spouse's) distributive share of partnership income. H&rblock Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). H&rblock Use the appropriate community property law to determine what is separate property. H&rblock Any other income that belongs to your spouse (or former spouse) under community property law. H&rblock You establish that you did not know of, and had no reason to know of, that community income. H&rblock See  Actual Knowledge or Reason To Know , below. H&rblock Under all facts and circumstances, it would not be fair to include the item of community income in your gross income. H&rblock See Indications of unfairness for liability arising from community property law, later. H&rblock Actual knowledge or reason to know. H&rblock   You knew or had reason to know of an item of community income if: You actually knew of the item of community income, or A reasonable person in similar circumstances would have known of the item of community income. H&rblock Amount of community income unknown. H&rblock   If you are aware of the source of the item of community income or the income-producing activity, but are unaware of the specific amount, you are considered to know or have reason to know of the item of community income. H&rblock Not knowing the specific amount is not a basis for relief. H&rblock Reason to know. H&rblock   The IRS will consider all facts and circumstances in determining whether you had reason to know of an item of community income. H&rblock The facts and circumstances include: The nature of the item of community income and the amount of the item relative to other income items. H&rblock The financial situation of you and your spouse (or former spouse). H&rblock Your educational background and business experience. H&rblock Whether the item of community income represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). H&rblock Indications of unfairness for liability arising from community property law. H&rblock   The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax due to the item of community income. H&rblock   The following are examples of factors the IRS will consider. H&rblock Whether you received a benefit, either directly or indirectly, from the omitted item of community income (defined below). H&rblock Whether your spouse (or former spouse) deserted you. H&rblock Whether you and your spouse have been divorced or separated. H&rblock  For other factors see Factors for Determining Whether To Grant Equitable Relief later. H&rblock Benefit from omitted item of community income. H&rblock   A benefit includes normal support, but does not include de minimis (small) amounts. H&rblock Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers received several years after the filing of the return. H&rblock   For example, if you receive property, including life insurance proceeds, from your spouse (or former spouse) and the property is traceable to omitted items of community income attributable to your spouse (or former spouse), you are considered to have benefitted from those omitted items of community income. H&rblock Equitable Relief If you do not qualify for the relief described above and are now liable for an underpaid or understated tax you believe should be paid only by your spouse (or former spouse), you may request equitable relief (discussed later). H&rblock How and When To Request Relief You request relief by filing Form 8857, as discussed earlier. H&rblock Fill in Form 8857 according to the instructions. H&rblock For relief from liability arising from community property law, you must file Form 8857 no later than 6 months before the expiration of the period of limitations on assessment (including extensions) against your spouse for the tax year for which you are requesting relief. H&rblock However, if the IRS begins an examination of your return during that 6-month period, the latest time for requesting relief is 30 days after the date the IRS' initial contact letter to you. H&rblock The period of limitation on assessment is the amount of time, generally three years, that the IRS has from the date you filed the return to assess taxes that you owe. H&rblock Innocent Spouse Relief By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return. H&rblock Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse). H&rblock However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. H&rblock The IRS can collect these amounts from either you or your spouse (or former spouse). H&rblock You must meet all of the following conditions to qualify for innocent spouse relief. H&rblock You filed a joint return. H&rblock There is an understated tax on the return that is due to erroneous items (defined later) of your spouse (or former spouse). H&rblock You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed). H&rblock See Actual Knowledge or Reason To Know, later. H&rblock Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax. H&rblock See Indications of Unfairness for Innocent Spouse Relief , later. H&rblock Innocent spouse relief will not be granted if the IRS proves that you and your spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. H&rblock A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. H&rblock Understated Tax You have an understated tax if the IRS determined that your total tax should be more than the amount that was actually shown on your return. H&rblock Erroneous Items Erroneous items are either of the following. H&rblock Unreported income. H&rblock This is any gross income item received by your spouse (or former spouse) that is not reported. H&rblock Incorrect deduction, credit, or basis. H&rblock This is any improper deduction, credit, or property basis claimed by your spouse (or former spouse). H&rblock The following are examples of erroneous items. H&rblock The expense for which the deduction is taken was never paid or incurred. H&rblock For example, your spouse, a cash-basis taxpayer, deducted $10,000 of advertising expenses on Schedule C of your joint Form 1040, but never paid for any advertising. H&rblock The expense does not qualify as a deductible expense. H&rblock For example, your spouse claimed a business fee deduction of $10,000 that was for the payment of state fines. H&rblock Fines are not deductible. H&rblock No factual argument can be made to support the deductibility of the expense. H&rblock For example, your spouse claimed $4,000 for security costs related to a home office, which were actually veterinary and food costs for your family's two dogs. H&rblock Actual Knowledge or Reason To Know You knew or had reason to know of an understated tax if: You actually knew of the understated tax, or A reasonable person in similar circumstances would have known of the understated tax. H&rblock Actual knowledge. H&rblock   If you actually knew about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. H&rblock You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. H&rblock For information about the criteria for determining whether you actually knew about an erroneous item, see Actual Knowledge later under Separation of Liability Relief. H&rblock Reason to know. H&rblock   If you had reason to know about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. H&rblock You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. H&rblock   The IRS will consider all facts and circumstances in determining whether you had reason to know of an understated tax due to an erroneous item. H&rblock The facts and circumstances include: The nature of the erroneous item and the amount of the erroneous item relative to other items. H&rblock The financial situation of you and your spouse (or former spouse). H&rblock Your educational background and business experience. H&rblock The extent of your participation in the activity that resulted in the erroneous item. H&rblock Whether you failed to ask, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question. H&rblock Whether the erroneous item represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). H&rblock Partial relief when a portion of erroneous item is unknown. H&rblock   You may qualify for partial relief if, at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item. H&rblock You will be relieved of the understated tax due to that portion of the item if all other requirements are met for that portion. H&rblock Example. H&rblock At the time you signed your joint return, you knew that your spouse did not report $5,000 of gambling winnings. H&rblock The IRS examined your tax return several months after you filed it and determined that your spouse's unreported gambling winnings were actually $25,000. H&rblock You established that you did not know about, and had no reason to know about, the additional $20,000 because of the way your spouse handled gambling winnings. H&rblock The understated tax due to the $20,000 will qualify for innocent spouse relief if you meet the other requirements. H&rblock The understated tax due to the $5,000 of gambling winnings you knew about will not qualify for relief. H&rblock Indications of Unfairness for Innocent Spouse Relief The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax. H&rblock The following are examples of factors the IRS will consider. H&rblock Whether you received a significant benefit (defined below), either directly or indirectly, from the understated tax. H&rblock Whether your spouse (or former spouse) deserted you. H&rblock Whether you and your spouse have been divorced or separated. H&rblock Whether you received a benefit on the return from the understated tax. H&rblock For other factors, see Factors for Determining Whether To Grant Equitable Relief later under Equitable Relief. H&rblock Significant benefit. H&rblock   A significant benefit is any benefit in excess of normal support. H&rblock Normal support depends on your particular circumstances. H&rblock Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understated tax. H&rblock Example. H&rblock You receive money from your spouse that is beyond normal support. H&rblock The money can be traced to your spouse's lottery winnings that were not reported on your joint return. H&rblock You will be considered to have received a significant benefit from that income. H&rblock This is true even if your spouse gives you the money several years after he or she received it. H&rblock Separation of Liability Relief Under this type of relief, the understated tax (plus interest and penalties) on your joint return is allocated between you and your spouse (or former spouse). H&rblock The understated tax allocated to you is generally the amount you are responsible for. H&rblock This type of relief is available only for unpaid liabilities resulting from the understated tax. H&rblock Refunds are not allowed. H&rblock To request separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. H&rblock You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. H&rblock (Under this rule, you are no longer married if you are widowed. H&rblock ) You were not a member of the same household (explained below) as the spouse with whom you filed the joint return at any time during the 12-month per- iod ending on the date you file Form 8857. H&rblock Members of the same household. H&rblock   You and your spouse are not members of the same household if you are living apart and are estranged. H&rblock However, you and your spouse are considered members of the same household if any of the following conditions are met. H&rblock You and your spouse reside in the same dwelling. H&rblock You and your spouse reside in separate dwellings but are not estranged, and one of you is temporarily absent from the other's household as explained in (3) below. H&rblock Either spouse is temporarily absent from the household and it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. H&rblock Examples of temporary absences include absence due to imprisonment, illness, business, vacation, military service, or education. H&rblock Burden of proof. H&rblock   You must be able to prove that you meet all of the requirements for separation of liability relief (except actual knowledge) and that you did not transfer property to avoid tax (discussed later). H&rblock You must also establish the basis for allocating the erroneous items. H&rblock Limitations on Relief Even if you meet the requirements discussed previously, separation of liability relief will not be granted in the following situations. H&rblock The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. H&rblock A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. H&rblock The IRS proves that at the time you signed your joint return, you had actual knowledge (explained below) of any erroneous items giving rise to the deficiency that were allocable to your spouse (or former spouse). H&rblock For the definition of erroneous items, see Erroneous Items earlier under Innocent Spouse Relief. H&rblock Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. H&rblock See Transfers of Property To Avoid Tax , later. H&rblock Actual Knowledge The relief discussed here does not apply to any part of the understated tax due to your spouse's (or former spouse's) erroneous items of which you had actual knowledge. H&rblock You and your spouse (or former spouse) remain jointly and severally liable for this part of the understated tax. H&rblock If you had actual knowledge of only a portion of an erroneous item, the IRS will not grant relief for that portion of the item. H&rblock You had actual knowledge of an erroneous item if: You knew that an item of unreported income was received. H&rblock (This rule applies whether or not there was a receipt of cash. H&rblock ) You knew of the facts that made an incorrect deduction or credit unallowable. H&rblock For a false or inflated deduction, you knew that the expense was not incurred, or not incurred to the extent shown on the tax return. H&rblock Knowledge of the source of an erroneous item is not sufficient to establish actual knowledge. H&rblock Also, your actual knowledge may not be inferred when you merely had a reason to know of the erroneous item. H&rblock Similarly, the IRS does not have to establish that you knew of the source of an erroneous item in order to establish that you had actual knowledge of the item itself. H&rblock Your actual knowledge of the proper tax treatment of an erroneous item is not relevant for purposes of demonstrating that you had actual knowledge of that item. H&rblock Neither is your actual knowledge of how the erroneous item was treated on the tax return. H&rblock For example, if you knew that your spouse received dividend income, relief is not available for that income even if you did not know it was taxable. H&rblock Example. H&rblock Bill and Karen Green filed a joint return showing Karen's wages of $50,000 and Bill's self-employment income of $10,000. H&rblock The IRS audited their return and found that Bill did not report $20,000 of self-employment income. H&rblock The additional income resulted in a $6,000 understated tax, plus interest and penalties. H&rblock After obtaining a legal separation from Bill, Karen filed Form 8857 to request separation of liability relief. H&rblock The IRS proved that Karen actually knew about the $20,000 of additional income at the time she signed the joint return. H&rblock Bill is liable for all of the understated tax, interest, and penalties because all of it was due to his unreported income. H&rblock Karen is also liable for the understated tax, interest, and penalties due to the $20,000 of unreported income because she actually knew of the item. H&rblock The IRS can collect the entire $6,000 plus interest and penalties from either Karen or Bill because they are jointly and individually liable for it. H&rblock Factors supporting actual knowledge. H&rblock   The IRS may rely on all facts and circumstances in determining whether you actually knew of an erroneous item at the time you signed the return. H&rblock The following are examples of factors the IRS may use. H&rblock Whether you made a deliberate effort to avoid learning about the item in order to be shielded from liability. H&rblock Whether you and your spouse (or former spouse) jointly owned the property that resulted in the erroneous item. H&rblock Exception for spousal abuse or domestic violence. H&rblock   Even if you had actual knowledge, you may still qualify for relief if you establish that: You were the victim of spousal abuse or domestic violence before signing the return, and Because of that abuse, you did not challenge the treatment of any items on the return because you were afraid your spouse (or former spouse) would retaliate against you. H&rblock   If you establish that you signed your joint return under duress (threat of harm or other form of coercion), then it is not a joint return, and you are not liable for any tax shown on that return or any tax deficiency for that return. H&rblock However, you may be required to file a separate return for that tax year. H&rblock For more information about duress, see the instructions for Form 8857. H&rblock Transfers of Property To Avoid Tax If your spouse (or former spouse) transfers property (or the right to property) to you for the main purpose of avoiding tax or payment of tax, the tax liability allocated to you will be increased by the fair market value of the property on the date of the transfer. H&rblock The increase may not be more than the entire amount of the liability. H&rblock A transfer will be presumed to have as its main purpose the avoidance of tax or payment of tax if the transfer is made after the date that is 1 year before the date on which the IRS sent its first letter of proposed deficiency. H&rblock This presumption will not apply if: The transfer was made under a divorce decree, separate maintenance agreement, or a written instrument incident to such an agreement, or You establish that the transfer did not have as its main purpose the avoidance of tax or payment of tax. H&rblock If the presumption does not apply, but the IRS can establish that the purpose of the transfer was the avoidance of tax or payment of tax, the tax liability allocated to you will be increased as explained above. H&rblock Equitable Relief If you do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law, you may still be relieved of responsibility for tax, interest, and penalties through equitable relief. H&rblock Unlike innocent spouse relief or separation of liability relief, you can get equitable relief from an understated tax (defined earlier under Innocent Spouse Relief ) or an underpaid tax. H&rblock An underpaid tax is an amount of tax you properly reported on your return but you have not paid. H&rblock For example, your joint 2009 return shows that you and your spouse owed $5,000. H&rblock You paid $2,000 with the return. H&rblock You have an underpaid tax of $3,000. H&rblock Conditions for Getting Equitable Relief You may qualify for equitable relief if you meet all of the following conditions. H&rblock You are not eligible for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. H&rblock You have an understated tax or an underpaid tax. H&rblock You did not pay the tax. H&rblock However, see Refunds , later, for situations in which you are entitled to a refund of payments you made. H&rblock You establish that, taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated or underpaid tax. H&rblock See Factors for Determining Whether To Grant Equitable Relief, later. H&rblock You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. H&rblock A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. H&rblock Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. H&rblock See Transfers of Property To Avoid Tax, earlier, under Separation of Liability Relief. H&rblock You did not file or fail to file your return with the intent to commit fraud. H&rblock The income tax liability from which you seek relief must be attributable to an item of the spouse (or former spouse) with whom you filed the joint return, unless one of the following exceptions applies: The item is attributable or partially attributable to you solely due to the operation of community property law. H&rblock If you meet this exception, that item will be considered attributable to your spouse (or former spouse) for purposes of equitable relief. H&rblock If the item is titled in your name, the item is presumed to be attributable to you. H&rblock However, you can rebut this presumption based on the facts and circumstances. H&rblock You did not know, and had no reason to know, that funds intended for the payment of tax were misappropriated by your spouse (or former spouse) for his or her benefit. H&rblock If you meet this exception, the IRS will consider granting equitable relief although the underpaid tax may be attributable in part or in full to your item, and only to the extent the funds intended for payment were taken by your spouse (or former spouse). H&rblock You establish that you were the victim of spousal abuse or domestic violence before signing the return, and that, as a result of the prior abuse, you did not challenge the treatment of any items on the return for fear of your spouse's (or former spouse's) retaliation. H&rblock If you meet this exception, relief will be considered although the understated tax or underpaid tax may be attributable in part or in full to your item. H&rblock Factors for Determining Whether To Grant Equitable Relief The IRS will consider all of the facts and circumstances in order to determine whether it is unfair to hold you responsible for the understated or underpaid tax. H&rblock The following are examples of factors that the IRS will consider to determine whether to grant equitable relief. H&rblock The IRS will consider all factors and weigh them appropriately. H&rblock Relevant Factors The following are examples of factors that may be relevant to whether the IRS will grant equitable relief. H&rblock Whether you are separated (whether legally or not) or divorced from your spouse. H&rblock A temporary absence, such as an absence due to imprisonment, illness, business, vacation, military service, or education, is not considered separation for this purpose. H&rblock A temporary absence is one where it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. H&rblock Whether you would suffer a significant economic hardship if relief is not granted. H&rblock (In other words, you would not be able to pay your reasonable basic living expenses. H&rblock ) Whether you have a legal obligation under a divorce decree or agreement to pay the tax. H&rblock This factor will not weigh in favor of relief if you knew or had reason to know, when entering into the divorce decree or agreement, that your former spouse would not pay the income tax liability. H&rblock Whether you received a significant benefit (beyond normal support) from the underpaid tax or item causing the understated tax. H&rblock (For a definition of significant benefit, see Indications of Unfairness for Innocent Spouse Relief earlier. H&rblock ) Whether you have made a good faith effort to comply with federal income tax laws for the tax year for which you are requesting relief or the following years. H&rblock Whether you knew or had reason to know about the items causing the understated tax or that the tax would not be paid, as explained next. H&rblock Knowledge or reason to know. H&rblock   In the case of an underpaid tax, the IRS will consider whether you did not know and had no reason to know that your spouse (or former spouse) would not pay the income tax liability. H&rblock   In the case of an income tax liability that arose from an understated tax, the IRS will consider whether you did not know and had no reason to know of the item causing the understated tax. H&rblock Reason to know of the item giving rise to the understated tax will not be weighed more heavily than other factors. H&rblock Actual knowledge of the item giving rise to the understated tax, however, is a strong factor weighing against relief. H&rblock This strong factor may be overcome if the factors in favor of equitable relief are particularly compelling. H&rblock Reason to know. H&rblock   In determining whether you had reason to know, the IRS will consider your level of education, any deceit or evasiveness of your spouse (or former spouse), your degree of involvement in the activity generating the income tax liability, your involvement in business and household financial matters, your business or financial expertise, and any lavish or unusual expenditures compared with past spending levels. H&rblock Example. H&rblock You and your spouse filed a joint 2009 return. H&rblock That return showed you owed $10,000. H&rblock You had $5,000 of your own money and you took out a loan to pay the other $5,000. H&rblock You gave 2 checks for $5,000 each to your spouse to pay the $10,000 liability. H&rblock Without telling you, your spouse took the $5,000 loan and spent it on himself. H&rblock You and your spouse were divorced in 2010. H&rblock In addition, you had no knowledge or reason to know at the time you signed the return that the tax would not be paid. H&rblock These facts indicate to the IRS that it may be unfair to hold you liable for the $5,000 underpaid tax. H&rblock The IRS will consider these facts, together with all of the other facts and circumstances, to determine whether to grant you equitable relief from the $5,000 underpaid tax. H&rblock Factors Weighing in Favor of Equitable Relief The following are examples of factors that will weigh in favor of equitable relief, but will not weigh against equitable relief. H&rblock Whether your spouse (or former spouse) abused you. H&rblock Whether you were in poor mental or physical health on the date you signed the return or at the time you requested relief. H&rblock Refunds If you are granted relief, refunds are: Permitted under innocent spouse relief as explained later under Limit on Amount of Refund . H&rblock Not permitted under separation of liability relief. H&rblock Permitted in limited circumstances under equitable relief, as explained under Refunds Under Equitable Relief. H&rblock Proof Required The IRS will only refund payments you made with your own money. H&rblock However, you must provide proof that you made the payments with your own money. H&rblock Examples of proof are a copy of your bank statement or a canceled check. H&rblock No proof is required if your individual refund was used by the IRS to pay a tax you owed on a joint tax return for another year. H&rblock Refunds Under Equitable Relief In the following situations, you are eligible to receive a refund of certain payments you made. H&rblock Underpaid tax. H&rblock   If you are granted relief for an underpaid tax, you are eligible for a refund of separate payments that you made after July 22, 1998. H&rblock However, you are not eligible for refunds of payments made with the joint return, joint payments, or payments that your spouse (or former spouse) made. H&rblock For example, withholding tax and estimated tax payments cannot be refunded because they are considered made with the joint return. H&rblock   The amount of the refund is subject to the limit discussed later under Limit on Amount of Refund. H&rblock Understated tax. H&rblock   If you are granted relief for an understated tax, you are eligible for a refund of certain payments made under an installment agreement that you entered into with the IRS, if you have not defaulted on the installment agreement. H&rblock You are not in default if the IRS did not issue you a notice of default or take any action to end the installment agreement. H&rblock Only installment payments made after the date you filed Form 8857 are eligible for a refund. H&rblock   The amount of the refund is subject to the limit discussed next. H&rblock Limit on Amount of Refund The amount of your refund is limited. H&rblock Read the following chart to find out the limit. H&rblock IF you file Form 8857. H&rblock . H&rblock . H&rblock THEN the refund cannot be more than. H&rblock . H&rblock . H&rblock Within 3 years after filing your return The part of the tax paid within 3 years (plus any extension of time for filing your return) before you filed Form 8857. H&rblock After the 3-year period, but within 2 years from the time you paid the tax The tax you paid within 2 years immediately before you filed Form 8857. H&rblock Filled-in Form 8857 This part explains how Janie Boulder fills out Form 8857 to request innocent spouse relief. H&rblock Janie and Joe Boulder filed a joint tax return for 2007. H&rblock They claimed one dependency exemption for their son Michael. H&rblock Their return was adjusted by the IRS because Joe did not report a $5,000 award he won that year. H&rblock Janie did not know about the award when the return was filed. H&rblock They agreed to the adjustment but could not pay the additional amount due of $815 ($650 tax + $165 penalty and interest). H&rblock Janie and Joe were divorced on May 13, 2009. H&rblock In February 2010, Janie filed her 2009 federal income tax return as head of household. H&rblock She expected a refund of $1,203. H&rblock In May 2010, she received a notice informing her that the IRS had offset her refund against the $815 owed on her joint 2007 income tax return and that she had a right to file Form 8857. H&rblock Janie applies the conditions listed earlier under Innocent Spouse Relief to see if she qualifies for relief. H&rblock Janie meets the first and second conditions because the joint tax return they filed has an understated tax due to Joe's erroneous item. H&rblock Janie believes she meets the third condition. H&rblock She did not know about the award and had no reason to know about it because of the secretive way Joe conducted his financial affairs. H&rblock Janie believes she meets the fourth condition. H&rblock She believes it would be unfair to be held liable for the tax because she did not benefit from the award. H&rblock Joe spent it on personal items for his use only. H&rblock Because Janie believes she qualifies for innocent spouse relief, she first completes Part I of Form 8857 to determine if she should file the form. H&rblock In Part I, she makes all entries under the Tax Year 1 column because she is requesting relief for only one year. H&rblock Part I Line 1. H&rblock   She enters “2007” on line 1 because this is the tax year for which she is requesting relief. H&rblock Line 2. H&rblock   She checks the box because she wants a refund. H&rblock Note. H&rblock Because the IRS used her individual refund to pay the tax owed on the joint tax return, she does not need to provide proof of payment. H&rblock Line 3. H&rblock   She checks the “No” box because the IRS did not use her share of a joint refund to pay Joe's past-due debts. H&rblock Line 4. H&rblock   She checks the “Yes” box because she filed a joint tax return for tax year 2007. H&rblock Line 5. H&rblock   She skips this line because she checked the “Yes” box on line 4. H&rblock Part II Line 6. H&rblock   She enters her name, address, social security number, county, and best daytime phone number. H&rblock Part III Line 7. H&rblock   She enters Joe's name, address, social security number, and best daytime phone number. H&rblock Line 8. H&rblock   She checks the “divorced since” box and enters the date she was divorced as “05/13/2009. H&rblock ” She attaches a copy of her entire divorce decree (not Illustrated) to the form. H&rblock Line 9. H&rblock   She checks the box for “High school diploma, equivalent, or less,” because she had completed high school when her 2007 joint tax return was filed. H&rblock Line 10. H&rblock   She checks the “No” box because she was not a victim of spousal abuse or domestic violence. H&rblock Line 11. H&rblock   She checks the “No” box because neither she nor Joe incurred any large expenses during the year for which she wants relief. H&rblock Line 12. H&rblock   She checks the “Yes” box because she signed the 2007 joint tax return. H&rblock Line 13. H&rblock   She checks the “No” box because she did not have a mental or physical condition when the return was filed and does not have one now. H&rblock Part IV Line 14. H&rblock   Because she was not involved in preparing the return, she checks the box, “You were not involved in preparing the returns. H&rblock ” Line 15. H&rblock   She checks the box, “You did not know anything was incorrect or missing” because she did not know that Joe had received a $5,000 award. H&rblock She explains this in the space provided. H&rblock Line 16. H&rblock   She checks the box, “You knew that person had income” because she knew Joe had income from wages. H&rblock She also lists Joe's income. H&rblock Under “Type of Income” she enters “wages. H&rblock ” Under “Who paid it to that person,” she enters the name of Joe's employer, “Allied. H&rblock ” Under “Tax Year 1” she enters the amount of Joe's wages, “$40,000. H&rblock ” Because she is only requesting relief for one tax year, she leaves the entry spaces for “Tax Year 2” and “Tax Year 3” blank. H&rblock Line 17. H&rblock   She checks the “No” box because she did not know any amount was owed to the IRS when the 2007 return was signed. H&rblock Line 18. H&rblock   She checks the “No” box because, when the return was signed, she was not having financial problems. H&rblock Line 19. H&rblock   She checks the box, “You were not involved in handling money for the household” because Joe handled all the money for the household. H&rblock She provides additional information in the space provided. H&rblock Line 20. H&rblock   She checks the “No” box because Joe has never transferred money or property to her. H&rblock Part V Line 21. H&rblock   She enters the number “1” on both the line for “Adults” and the line for “Children” because her current household consists of herself and her son. H&rblock Line 22. H&rblock   She enters her average monthly income for her entire household. H&rblock Line 23. H&rblock   She lists her assets, which are $500 for the fair market value of a car, $450 in her checking account, and $100 in her savings account. H&rblock Signing and mailing Form 8857. H&rblock    Janie signs and dates the form. H&rblock She attaches the copy of her divorce decree (not illustrated) required by line 8. H&rblock Finally, she sends the form to the IRS address or fax number shown in the instructions for Form 8857. H&rblock This image is too large to be displayed in the current screen. H&rblock Please click the link to view the image. H&rblock Boulder's filled-in Form 8857 page 1 This image is too large to be displayed in the current screen. H&rblock Please click the link to view the image. H&rblock Boulder's filled-in Form 8857 page 2 This image is too large to be displayed in the current screen. H&rblock Please click the link to view the image. H&rblock Boulder's filled-in Form 8857 page 3 This image is too large to be displayed in the current screen. H&rblock Please click the link to view the image. H&rblock Boulder's filled-in Form 8857 page 4 Flowcharts The following flowcharts provide a quick way for determining whether you may qualify for relief. H&rblock But do not rely on these flowcharts alone. H&rblock Also read the earlier discussions. H&rblock Figure A. H&rblock Do You Qualify for Innocent Spouse Relief? Please click here for the text description of the image. H&rblock "Do You Qualify for Innocent Spouse Relief?" Figure B. H&rblock Do You Qualify for Separation of Liability Relief? Please click here for the text description of the image. H&rblock "Do You Qualify for Separation of Liability Relief?" Figure C. H&rblock Do You Qualify for Equitable Relief? This image is too large to be displayed in the current screen. H&rblock Please click the link to view the image. H&rblock "Do You Qualify for Equitable Relief?" Prev  Up  Next   Home   More Online Publications