Strategy 5 – Innocent Spouse Claims

An Innocent Spouse Claim is worth considering in cases where the taxpayers jointly owe a lot of IRS debt. The downside is that the IRS does not generally approve these claims. Worse, most of the appeals to the courts have been IRS wins.

That said, it is still worth considering. Innocent spouse claims arise in cases where the tax understatement can be attributed to just one spouse. Additionally,  the other spouse must have no knowledge or benefit from that understatement. The strategic advantage is that you might get a better result on the Reasonable Collection Potential formula by removing the one spouse from the liability.

An Offer-in-Compromise will only work if the taxpayers can show that they do not have the financial means that will enable them to pay the debt in full. The IRS does not accept offers for less than full pay merely because someone throws a number at them. Instead, they do a financial analysis. The results are plugged into the Reasonable Collection Potential formula. Removing one of the spouses from the liability could change the formula results and make the other spouse eligible for an offer.


Author: Jim Payne

Jim Payne, a Florida Certified Public Accountant (CPA) since 1976, offers candid insights on getting square with the IRS — with the least pain, and at the lowest cost — with (or without) the help of a tax representative. Mr. Payne is a former IRS agent and expert in business profitability, IRS audits, IRS payroll tax, and IRS non-filer issues. As a Tax Representative, his goal is clear: " I will speak on your behalf to all IRS agents, so you never have to, and I'll guide you in executing a strategy to resolve your IRS problem so you can get back to enjoying life."

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