5) Innocent Spouse and Statute Expiration
Innocent Spouse is a very complicated solution to tax liabilities. Innocent Spouse relief is for Jointly filed income tax returns only. Many spouses believe that the unpaid tax liability on a Jointly filed tax return, because the income was solely or predominantly earned by the other spouse, is the responsibility of the earning spouse. This is NOT the case, especially when more than one year is involved. If the Innocent Spouse benefited from the income, signed the tax return without provable duress, the tax liability is a “joint and several liability” meaning that both spouses are equally liable for the tax shown on the return. However, if the tax liability is the result of an audit assessment and the basis of the audit assessment, unreported income or erroneous expenses, was unknown to the Innocent Spouse, then there may be a basis for an Innocent Spouse Claim. Generally, Innocent Spouse relief is for spouses who are divorced or separated for a long period of time and the Innocent Spouse must not have benefited beyond normal living expenses from the non-requesting spouse’s ill-gotten gains.
Statute Expiration on the collection of unpaid taxes is 10 years from the “assessment date.” The assessment date is a specific date that is approximately four to six weeks after the tax return is filed, or after an audit is completed. (The assessment date can be easily found on a Federal Tax Lien or you can ask the IRS.) However, this 10 years can be extended to as many as 16 years by the taxpayer signing a waiver, filing bankruptcy, submitting an Offer in Compromise, or being out of the country for more than six months at a time. If you believe that the statute of limitations may be approaching, and your tax liability is close to being 10 years old, it is imperative that you contact a trained tax professional to determine the exact statute expiration date. An upcoming statute expiration date can be used to the advantage of a taxpayer, but must be handled very carefully.