There are three types of Innocent Spouse Relief. The most common one is known as classic innocent spouse relief and it is discussed in another blog entry. Now let’s discuss something known as Separate Liability Election.
In order for a spouse to qualify for a separate liability election they must prove that:
1. A joint tax return was filed.
2. the joint return had an understatement of tax.
3. the taxpayer and spouse have been legally separated or they are no longer married or they have been living apart for at least 12 months.
4. The request must be made within two years of when the IRS begins collection activities.
This separate liability election is used to separate the joint liabilities and allocate the appropriate income and tax to each spouse. This is something to keep in mind if any type of spouse relief could possibly apply to your situation.