Did you know it was quite possible to become an injured spouse and never actually be physically harmed? It is when talking about taxes. An “injured spouse” occurs when two people, who were or are married, file their taxes separately and at some point in the past one of them had a tax problem. When the latest round of filing gets processed, the good spouse diligently files and expects a refund. Instead, the money gets grabbed by the IRS to offset back taxes or penalties due from the bad spouse, ergo the injury. This sort of situation can happen as a result of unpaid student loans, back taxes, unpaid child support, or other federal debt.
There are some solutions, however, and they are part of the tax code. That said, the injured spouse needs to be proactive to pursue them.
First, you need to be eligible as an injured spouse. To meet this eligibility, you will need to have been current will all your tax reporting. This includes any income tax filings, payments, reports, and withholding. Long story short, your own tax record needs to be sqeaky clean before you go in and tell the IRS that you’ve been unfairly injured by a tax collection on your spouse’s debts. This includes being free and clear of any past-due federal debt from other issues maybe long forgotten.
For those who live in states that apply the legal property rule of community property, things get a bit more complicated. In these instances an analysis needs to be performed to determine what exactly is your obligation or not under a community property scenario, including debt. IRS Publication 555 – Community Property, goes into detail on this matter.
Once you’ve established that your record is clean, and that community property issues either don’t apply or you’re clear on where you stand with them, then you can pursue recourse via the IRS regarding your injured spouse status. To do so, you will need to file IRS Form 8379 – Injured Spouse Allocation, requesting a review and recovery of your share of a refund that you were expecting. Form 8379 can be attached to a copy of your filed tax return to help the reviewer understand the case file and context better, but it can also be filed independently as well. If you did receive a notice of offset, it would be a good idea to attach a copy of that document as well for quicker reference.
Filing the request for review can be performed either by paper and mail or by filing the Form 8379 via the Internet. For those sending in a mailed copy, make sure to clearly spell out the words “INJURED SPOUSE” on the top corner, left side, of your tax return if attached. This flags the document to review the Form 8379 request first before going through your tax return and grabbing the offset refund.
Make sure that when you fill out the Form 8379 you have included the social security numbers of both yourself and your spouse. The IRS can’t process the document correctly without both of them clearly provided on the form. The injured spouse is required to certify the form by signature as well.
One of the items that causes a bit of confusion with the use of IRS Form 8379 is the status of innocent spouse relief. This relief is geared more for situations where a spouse suffered at the hands of an abusive partner, and has realized tax implications that were the result of the abusive partner’s inappropriate, incorrect or criminal activity. This is a far different situation than where a married partner just owes a debt back to the federal government. Common examples involve domestic abuse, tax evasion without telling the innocent spouse, or criminal activity resulting in tax violations without telling the innocent spouse. The innocent spouse relief occurs under special circumstances that are spelled out in IRS Publication 971 – Innocent Spouse Relief. Additionally, a claim under that process needs to be handled via IRS Form 8857 – Request for Innocent Spouse Relief instead.
Sources:
IRS Publication 555 – Community Property
IRS Form 8379 – Injured Spouse Allocation
IRS Publication 971 – Innocent Spouse Relief
IRS Form 8857 – Request for Innocent Spouse Relief
U.S. Internal Revenue Service: Applying for Innocent Spouse Relief