Innocent Spouse

[Gary]

I need to file Form 8857 for my client. She was married in 2006 and filed a joint return with her husband. They are now divorced. She just received a notice from the IRS that the spouses gambling winnings were not reported. Neither spouse has paid the additional taxes.

Box 2 says "check the box for the year you would like a refund if you qualify for the relief." Since they did not paid the additional tax, I would assume there is no refund. Is this correct? Or do I check the box?

Should I file 8857 before we file the 2008 return, or does it not make a difference?

[Koss]

2008 Refund

If she doesn't qualify for innocent spouse relief, then the IRS is going to seize her refund for 2008 and apply it to the tax and penalties that are due for 2006. So I think your client is seeking innocent spouse relief in order to receive a refund for 2008.

If you file the 2008 return before filing Form 8857, or if you file them at the same time, you better assume that the IRS will seize the 2008 refund, and that she'll only get it back if they grant the requested relief.

You could file an extension for 2008, and wait to see if the innocent spouse relief is granted before filing the 2008 return.

But I'm not sure it really makes a difference. It will take quite a bit of time for the IRS to evaluate and process the Form 8857. Whether you file the return now or file an extension, she won't get a refund until after the relief is granted...

BMK

[WhiteOleander]

I have had limited experience with the innocent spouse law. But, it does seem that it is difficult to get the IRS to grant it.

The spouse will have to show that she had no knowlege of the income and had no reason to know. Also she might have to prove she was under some sort of duress to sign the return. The IRS seems very reluctant to relieve one spouse of taxes. They think that now that the couple have broken up, one spouse just doesn't want to be responsible for a debt anymore.

[BOB W]

I have had limited experience with the innocent spouse law. But, it does seem that it is difficult to get the IRS to grant it.

The spouse will have to show that she had no knowlege of the income and had no reason to know. Also she might have to prove she was under some sort of duress to sign the return. The IRS seems very reluctant to relieve one spouse of taxes. They think that now that the couple have broken up, one spouse just doesn't want to be responsible for a debt anymore.

ONE OF THE KEYS TO INNOCENT SPOUSE RELIEF IS TO EXPRESS THAT SHE REC'D NO ECONOMIC BENEFIT FROM HIS ACTIVITY. MAYBE EVEN EXPRESS THE HE HAD HIS OWN LIFE STYLE SEPARATE FROM HER'S.