Tax Audit Guides & Information on Income Tax Audits

Everyone has heard the statistics about tax audits and how it is very unlikely to receive one in a given tax year, but over your lifetime it is more likely than not that you will get audited. Whether you are currently being audited, you want to prevent an audit, need help with an audit, or just want general information on an audit, you will find everything you need below.

Initial Audit Contact 

If the IRS selects your tax return for an audit, the agency will send you an initial audit contact letter. The agency always reaches out through the mail, not over the phone or in person. There are a few different audit contact notices, but one of the most common is the 566 series of letters. The IRS sends many different 566 letters, and they all feature letters after the numbers that indicate the type of audit or type of return being audited. 

Avoid Tax Audit: Tips on How to Avoid IRS Audits

Everyone has heard the horror stories about tax audits. These are some tips to keep in mind when you are filing your taxes or doing financial planning, in order to limit your chances of getting audited. A basic understanding of how the IRS audit process works and what they look for can significantly reduce your chances of getting audited by avoiding the common mistakes most people make and end up getting audited.

IRS Audit Tips: Advice on Beating & Surviving a Tax Audit

Two goals you should have when going through an audit are to minimize the financial impact of the audit and to prevent the IRS from investigating beyond the original items selected for audit. There are no clear-cut formulas to an audit, an audit is more like a game filled with many different strategies. These tips can help ensure the financial impact of an IRS audit is minimal.

Help! I'm Being Audited But I Don't Have Receipts

During an audit, you verify the claims you made on your tax return to the IRS. This can be difficult if you don't have receipts. This guide explains how you can reconstruct expenses if you're facing an audit without receipts. It also outlines how to invoke the Cohan rule if you're in this situation. 

IRS Audit Procedure: Guidelines for IRS Audits

Understand how the audit process works. Know how and why tax returns are selected for an IRS audit. Once a tax return is filed it will go through a series of computer programs to check for the likelihood of errors. Depending upon what kind of errors the IRS believes you have made it will send a letter and say what kind of audit they are planning on doing. Understand basically how an audit works and what to expect after the audit has been completed.

IRS Audit Red Flags: Understand Who & When the IRS Audits

Audit flags are another name for factors that increase the score your tax return gets when it is processed by the IRS computers or is reviewed manually by an IRS employee. Many of these red flags can be avoided, while some cannot. Being aware of common red flags while completing your tax return can significantly reduce your chances of an audit. If some of these red flags cannot be avoided for you remember to keep as much support for those items as you can to make your life easier if you do get audited.

IRS Audit Reconsideration Request Guide

IRS audit reconsideration is a process where a taxpayer can have the IRS review an audit that has already been completed. The irs audit reconsideration request must be made in writing and should include new information or documentation that was not available at the time of the original audit. The IRS will then take a look at the case and determine if the original audit conclusions were correct. If the IRS decides that the original audit was incorrect, they will make the necessary adjustments. The IRS audit reconsideration process can be very beneficial for taxpayers who believe that they have been unfairly audited. However, it is important to note that the irs does not guarantee that they will reconsider your case or that they will change their original decision. Learn more about the audit reconsideration procedure, when, how, and where to submit an IRS audit reconsideration, as well as the paperwork that must be sent.

Employee Retention Credit (ERC) Audits

The IRS audits payroll tax returns with employee retention credits (ERC) at a higher rate than most other payroll tax returns. The above resource explains why the IRS audits these credits so aggressively, how to reduce your audit risk, and what to do if you're selected for an audit. It also explains ERC audit penalties.  

Guide to IRS Form 4549 – Income Tax Examination Changes

If the IRS reviews your return and decides to make a change. the IRS will send you IRS form 4549. This form will go over the IRS's proposed changes to your tax return as well as the change to the amount you owe (or possible refund). This form will also give you the ability to request an audit reconsideration. This guide will go over what to expect when you receive this form and how to respond

IRS Audit Statute of Limitations: Years Back IRS Audits Tax Returns

The IRS has strict rules on when it can audit a tax return. Know when you can stop worrying about a tax return that you filed in the past. There are actually a few different statutes that apply to tax returns being audited and they are based upon the severity of the “mistakes” that were made.

Most of the time the IRS will only have three years to audit a return–the assessment statute of limitations gives the IRS three years after a return is filed (or after its due date if later) to assess taxes on a filed return. That's also why you're supposed to keep most tax records for three years – and even longer in some cases. However, if you don’t hear from the IRS within 18 months, it is very unlikely that your return will be selected for an audit — even if you filed late.

IRS Audit Statistics: Rates and Chances of Receiving a Tax Audit

Statistically, the average person only has a 1% chance of getting audited. This 1% is only the average of all different income levels. Individuals that report higher income are more than twice as likely to get audited as people with lower income. Here are some statistics on IRS audits based upon income class and filing type.

IRS Audit Letter: Understanding Your Tax Audit Notification

The standard way for the IRS to communicate before and after a tax audit is through various IRS audit letters. Understand the various letters that the IRS will send to you, what they mean, and what actions must be taken on your part after receiving one of them. It is important these notices don’t go overlooked because most of them will require you to take action.

Information Document Request (IDR) and Form 4564

An IDR is a primary tool for the IRS to obtain information for a taxpayer under audit. The IRS will issue such information requests on form 4564. Understand how IDR requests work, how to respond, what happens if you don't respond, and why you should consider hiring a tax professional to help with these types of requests.

IRS Summons: Why the IRS Sends and What to Do If You Receive One

The IRS issues summons to people who are being investigated or might have important information related to an investigation of another entity. This guide covers the various types of summons, what to do if you receive a summons, what happens if you ignore it, and a guide to responding to one.

IRS Audit Penalties – Possible Penalties From An Adverse Tax Audit

If the IRS audits your tax return and finds some inaccuracies, you most likely will owe taxes, along with additional penalties and interest. Find out some common IRS penalties and potential criminal charges you would be facing.

Tax Audit Help: IRS Audit Defense, Assistance & Representation

Do you need help defending against an IRS audit? Understand how we can help connect you with a tax professional to either give you audit assistance or audit representation. Using a tax professional can significantly increase your chances of getting a better outcome. Audits are stressful and time-consuming. 

Does Tax Topic 151 Mean I'm Being Audited?

Tax Topic 151 is not the same as an audit. If you see this code on the IRS's website when you're waiting for your tax refund, it means the IRS has frozen your refund and is reviewing your return. This is not an audit, but you may be asked to provide additional information. Additionally, if the IRS finds any issues during the review, the agency may decide to move forward with an audit. 

Tax Audit Attorney

Find out when you should hire a tax audit attorney for help with an IRS or state tax audit. Get tips on selecting an audit attorney. Find out how to find the best audit representation near you.

If you are looking for a licensed tax professional to help with a tax audit, review this list of tax professionals who have experience resolving IRS audits, or start a search below and click "audit or examination" using the filter on the search page called "IRS Problem Experience."

What is the IRS Audit Statute of Limitations?

Wondering if you're at risk of being audited? Generally, if you don't receive an initial audit contact letter within 18 months after filing, you're probably in the clear. The IRS audits most returns fairly quickly after they're filed, but by law, the agency has three years and even longer in select situations.

The IRS has three years to audit most returns, but the agency can take up to six years if you don't report 25% or more of your income, and forever in cases of fraud. The window is called the audit statute of limitations, and its last day is the Assessment Statute Expiration Date (ASED) — that's because the last day the IRS can audit is also the last day the agency can assess tax related to that return against you. Understanding the audit rules can help you get peace of mind and understand what to do if you make a mistake or are contacted about an audit. 

To get help now, use TaxCure to find audit representation in your area, or keep reading for more details.

Key takeaways

• Audit statute of limitations starts the day you file, or the return due date if you file early.
• The statute period runs for three, six, or unlimited years, depending on the situation.
• The last day is called the assessment statute expiration date or ASED.

How to Determine the Audit Statute of Limitations

The statute of limitations determines how long the IRS has to audit your tax return. This time period starts on the day you file your return, but if you file your return early, the clock starts running on the return's original due date. For example, your 2025 individual income tax return is due April 15th, 2026. If you file early on March 1, 2026, the audit statute of limitations period begins on April 15, 2026. If you file late, say on December 1, 2026, the clock starts on that date. 

Now, how long does the IRS have from that date to audit your return? The standard time frame is three years, but there are exceptions. 

• 3 Years: The standard amount of time that the IRS has to legally audit most tax returns. 
• 6 Years: If the income on the tax return was understated by 25% or more — for example, your return reports $75,000 in income but you really earned $100,000 or more.
• Unlimited: If the tax return was filed with the intent to commit fraud. 

The IRS may also apply the six-year audit rule in the following situations:

• Basis overstatement — If a basis overstatement leads to you effectively not reporting 25% or more of your income. For example, let's say, for the sake of simplicity, that the only item on your return is a property sale. You sold the property for $1 million and claim that its basis (the purchase price, plus major repairs, minus depreciation) is $600,000, so your taxable gain is $400,000. However, your actual basis is $200,000, and your gain should have been $800,000. Since you didn't report half of your income, the IRS can audit for six years. If they determine that you underreported the basis due to fraud, they can audit for an unlimited amount of time. 
• Foreign income, gifts, and assets – If you fail to report more than $5000 of foreign income. The IRS also has six years to audit FBARs, Form 3520 to report foreign gifts, and Form 8938 to report foreign assets under FACTA. If you don't file these forms, the clock never starts.

In addition to cases of fraud, the IRS also has unlimited time to audit returns in the following cases:

• Failure to file Form 5471 – The IRS has unlimited time to audit your full return if you fail to file this form, which reports your ownership in a foreign corporation.
• Alteration of the "penalty of perjury" language — if you cross out this language or fail to sign your return, the IRS has unlimited time to audit.

Can the audit statute of limitations be extended or tolled?

Aside from income understatement, fraud, or cases related to foreign income, gifts, or assets, the IRS may extend the audit timeline if you agree in writing to extend it — always talk with a tax professional before signing this type of agreement. The IRS may also toll (pause) the clock and extend the timeline if you're out of the country or if the agency sends a John Doe summons related to you or your return. 

For example, say that you sold crypto and the IRS sent a John Doe summons to the crypto exchange to get a list of all of their clients. Your name appeared on the list, and due to that connection, the IRS was able to toll the statute of limitations and take extra time to audit your return. Sometimes, the IRS can extend the statute of limitations to audit a specific type of return — for instance, the agency extended the audit statute timeline on payroll returns with Employee Retention Credits (ERC).

How long does the IRS have to audit business tax returns?

The agency uses the same timeline and rules for most business tax returns — for example, if you file a corporate income tax return, the IRS may have three, six, or unlimited years to audit it. However, the calculations are a bit different for payroll tax returns. Although the quarterly returns are due throughout the year, the audit time clock doesn't start until April 15 following the year these returns are filed, and then, it runs as usual. 

For example, your 2025 quarterly payroll tax returns are due on April 15, 2025, July 15, 2025, October 15, 2025, and January 15, 2026, but the audit time clock doesn't start until April 15, 2026. In other words, the IRS has until April 15, 2029, to audit the quarterly return that was due on April 15, 2025, as well as the other three returns.

How long does the IRS have to audit unfiled returns?

If you don't file a return, the clock never starts running. There is no statute of limitations on unfiled returns. Theoretically, the agency can go back to any tax period to assess tax against you if you don't file a return. However, that typically only happens in cases where the agency thinks you may have committed fraud or tax evasion. In most cases, if you're years behind and you want to get back into compliance, you only need to file the last six years' of returns.

Does filing old returns increase the risk of an audit?

No, the IRS is not any more likely to audit a late return than a return that was filed on time. If you're years behind on filing tax returns, you should not worry that catching up will increase your audit risk. In fact, contrary to common misbeliefs, filing old returns can actually help you because it starts the assessment statute of limitations, which never starts if you don't file anything.

How long does the IRS have to audit an amended tax return?

The original assessment statute expiration date applies to amended tax returns. However, if you amend a return that shows an increase in tax within 60 days before the ASED, the IRS gets an additional 60 days to audit it. For example, say that you file your 2025 tax return early or on time. The IRS has until April 15, 2029, to audit it (unless one of the exceptions for a longer time period applies).

Now, imagine that you amend the return on January 10, 2029; the agency still must audit the return by April 15, 2029. However, if you amend the return on March 16, 2026, just 30 days before the audit deadline, and the return shows an increase in tax, the IRS now gets an extra 60 days, so until May 15, 2026. 

How does the IRS decide when to go back six or more years?

Generally, the IRS audits a taxpayer's most recently filed return, and the auditor may decide to look at the last three years of returns. If those returns indicate significant income understatement or fraud, then the agency goes back six years or even further in some cases. The IRS doesn't randomly start looking at six-year-old returns for these issues — instead, it starts by auditing newly filed returns and then goes back if there are concerns.

How Long Does the IRS Take to Audit Most Tax Returns?

The IRS tries to audit returns as quickly as possible. Most returns are audited within two years of being filed. So, although the agency can take three years or even longer, in most cases, if you don't get an audit notice within two years of filing, you don't have to worry — again, there are significant exceptions as outlined above.

How many tax returns does the IRS audit?

The IRS audits about two returns for every 1000 returns filed. The audit stats vary based on income level, type of return, and other factors. However, just because the numbers are low doesn't mean you should be lulled into a sense of false security. There's always a chance of being audited, and you need to be prepared just in case.

What if you made a mistake on your return?

If you made a mistake on your return, you may need to amend it — that just means you file a return that shows your originally reported info along with the correct details. However, if it's a minor mistake and the audit time frame has already passed, you may not need to amend. On the other end of the spectrum, if the "mistake" you made was actually a potential tax crime, you should not amend — instead, you may need to go through the IRS's criminal voluntary disclosure program. Talk with a tax attorney to protect yourself.

How long should I keep tax records?

The IRS recommends keeping tax documents for at least three years in case you're selected for an audit. However, some details must be saved for at least six years. To be on the safe side, you may want to keep all tax records for six years. If you're selected for an audit and don't have receipts or other documents, it can be hard — but not impossible — to get through the audit.

Why Is the IRS Asking to Extend the Time to Audit?

Often, if you're selected for an audit, the auditor will ask you to sign a waiver extending the assessment statute. That's typically because the IRS wants more time to audit the return. A complicated tax audit can take anywhere from a few months to over a year. For example, say that the agency selects your return for an audit, but there are only three months til the time limit runs out. The IRS may ask you to sign a waiver to give them extra time. 

There are a few points to consider. On one hand, signing the waiver gives the IRS extra time to assess tax against you, and if the statute expired, they wouldn't have that time. But on the other hand, if you don't extend the timeline, the auditor may rush through the process, and if they assess tax against you, you'll have to deal with audit appeals.

Collection Timelines If the Audit Leads to a Tax Assessment

At the end of the audit, the auditor will let you know if they accepted your return as filed or made changes — changes are often reported on Form 4549 (Income Tax Examination Changes), but other forms may be used for different types of returns. If the IRS assesses tax against you, they have 10 years to collect it — the last day of this time frame is called the Collection Statute Expiration Date (CSED).

If the auditor assesses tax, you will incur audit penalties. At the very least, there will be a penalty for failure to report the income, but if there were significant errors, you may face an accuracy-related penalty or potentially even a civil fraud penalty. 

What to Do If You're Selected for an Audit

You'll receive an audit notice in the mail if you've been selected for an audit — that may happen due to discrepancies between your return and other information provided to the IRS, random selection, or other audit triggers. If you receive a notice, you should reach out for help — review this list of tax professionals who have experience resolving IRS audits or start a search below and click "audit or examination" using the filters on the search page under "problem experience."

Tax Audit Help: IRS Audit Defense, Assistance & Representation

Tax audits can be stressful and complicated. You can find tax professionals on our site that have helped thousands of taxpayers work their way through IRS and State tax audits. We can help connect you with a tax professional that can either provide you with audit assistance or audit representation.

How Audit Assistance Works

• Have a tax professional review your notice and explain what everything means
• Help you find or come up with any documents you may need
• Research all of the issues that are mentioned in the notice
• Get a detailed description of what to expect during the audit
• Review the audit findings and get a detailed description of next steps
• Understand your options if are audited and owe more money and cannot pay
• Get an understanding if your case is qualified for an appeal

If you want your professional to do all handling for you, that can be done as well. You can have your tax professional handle all communication and represent you before the IRS or State taxing authority.

How Audit Representation Works

• All audit communication goes to your tax professional and they respond back on your behalf
• Research any issues that are likely to come up during the audit
• Respond to the taxing authorities arguments by coming up with answers on your behalf
• Meet with the IRS or taxing authority in person if required on your behalf
• Negotiate and settle taxes owed if you end up owing more money during the audit and cannot pay
• Handle any unforeseen issues that may arise during the audit

How Using a Professional is Beneficial During an Audit

Using a tax professional to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax professional can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with tax professionals because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

How it Works

• View our network's top-rated audit professionals on the right column of this page. Also, use the search feature on our site to get more granular with your tax issue to find the best professional that meets your unique needs. 
• Get a quick understand of how the professional can help you in your particular situation and what the likely outcome will be
• You can choose to have the tax firm/tax professional file for power of attorney and represent you before the IRS or State taxation authority
• Get your audit underway without the stress of handling it on your own

Do you need help defending against an IRS audit? Understand how we can help connect you with a tax professional to either give you audit assistance or audit representation. Using a tax professional can significantly increase your chances of getting a better outcome. Audits are stressful and time-consuming. 

To find a list of tax professionals that help with a tax audit, these tax professionals have experience resolving IRS audits. You can also begin a search below and click "audit or examination" using the search filter called "IRS problem experience."

IRS Audit Red Flags: Understand Who & When the IRS Audits

On average, the IRS audits about 0.5% of all filed tax returns, but audit stats vary widely depending on the type of return filed, the amount of income reported, and other red flags. If you're curious about your chances of being audited, the stats will only take you so far — you need to be aware of the red flags that may be showing up on your tax return.

IRS red flags are another name for the Discriminant Function System (DIF) used by the IRS to generate a tax return score. The higher the DIF score, the more likely the tax return will be audited. While it is not known exactly how the IRS computer system works, many tax professionals know which factors the IRS weighs more than others. The IRS uses three different computer systems to check for different red flags.

Some red flags don’t always lead to an audit. They are all considered by the computer program and weighted together to determine if the return should be audited. Pretty much what the computers do is a complex statistical analysis of each tax return, and if the return falls outside of statistical norms, then it will likely be flagged. Most of the time, when the IRS computer has flagged a return, it will be manually reviewed by an IRS employee to determine if the return should be audited.

Individuals and small businesses have different red flags because of the difference in the nature of both. Below are the most common individual tax return red flags and small business tax return red flags.

Former IRS Agent Explains Red Flags That Can Trigger an IRS Audit

Individual Tax Return Red Flags

These are the most common red flags for personal tax returns.

1. Rounded numbers: The likelihood of your investment earnings or your mortgage interest being a rounded number is very unlikely. The IRS knows that if numbers are rounded, there is a higher chance that the person filling out the tax return is not using actual numbers. Don’t panic if you do see that your investments actually came out to a straight $1,000.00. Normally a flag won’t be triggered unless there are a few instances of rounded numbers.
2. Unreported income: The IRS will catch this through their matching process if you fail to report income. It is required that third parties report taxpayer income to the IRS, such as employers, banks, and brokerage firms. If the IRS notices that a third party reported that they paid you income, but you don’t have that income reported on your return, this immediately raises a red flag.
3. Sloppy or incomplete information: One of the biggest red flags is if the tax return has math errors or is incomplete. It is always smart to use tax software that checks everything electronically. These can be some of the easiest errors to avoid.
4. Charitable donations: Charitable donations are great, but the IRS has found that many abuse this deduction. This is why the IRS will look into many large charitable donations. The IRS knows what the average charitable donation amount is for someone of your income bracket, and if you donate more than the average this will raise a red flag. If you are a generous person, just be sure to keep all records of the transactions to prove to the IRS if they ask.
5. Earning over 100K: The IRS likes to focus its efforts on individuals so that they can justify the expense of the audit. Individuals making over $100,000 are 500% more likely to get audited than those making under that. This is one of those flags that you cannot help. It is just a fact that the IRS audits people with higher incomes at a much higher rate.
6. Low-income profession: On average, the IRS computer knows what someone of your profession and location makes. If you report a number significantly lower than the IRS would expect, that could be a red flag. If you get audited for this reason and reported everything correctly, then it is probably time for you to request a raise.
7. Differences in Federal and State tax returns: If there are differences in what is reported on each of these, you can expect red flags to go up for the IRS and for the State. Be sure these are consistent. Using tax preparation software can help with this, and make sure there are no differences when you file.
8. Large swings in income: The IRS thinks there should be consistency in earnings. This is a red flag if there are large swings of reported income that cannot be explained by W-2s or 1099’s. This is another one of those red flags you can’t avoid if you have large swings in income. If you expect large swings, just be prepared to show documentation for the differences.
9. Job Expenses: Most people cannot take job expense deductions if they are W-2 employees. There are cases where this is allowed if certain conditions are met. The IRS knows that not many people meet these conditions, and far more people take the deduction than qualify to take it. Therefore, it is a red flag to take job expense deductions if you are a W-2 employee.
10. Tax avoidance transactions: Sometimes, incriminating documents are turned over to the IRS from the IRS’s efforts to identify participants in tax avoidance transactions. This can happen when the IRS gets the courts to get companies that are promoters of tax avoidance schemes to hand over documents related to these transactions. These transactions can point out individuals that have taken part in tax avoidance transactions.

Small Business/Self-Employed Tax Return Red Flags

These are the most common red flags for small business/self-employed tax returns.

1. Home Office Deductions: Since the IRS has allowed home office deductions, they have been abused. There are many cases where these are legitimate deductions, but people often overstate them or misuse them, which is why the IRS investigates these types of deductions more than any other. Typically, the IRS will look at your profession and prior tax filings to determine how much weight to put on this red flag. If you are taking a home office deduction and it is legitimate, be sure to have the proper backup to support it if any questions arise.
2. Filing a Schedule C: Studies have shown that people who file a Schedule C are much more likely to get audited than those who don’t. If you do file a schedule C, be sure to have all the documentation to back up the deductions that you have taken. You can also consider forming a separate business entity (LLC, S Corp, Corporation) and flowing expenses through there instead of a Schedule C.
3. Entertainment deductions: This deduction has been abused quite a bit in the past. Many people put too many entertainment or business meal expenses on the business when most are not allowed. This will raise a red flag if the amount charged seems too large compared to the business size.
4. Losses reported from hobby instead of business venture: The tax code does not permit individuals to deduct hobby expenses on their tax return. If you have claimed expenses on a Schedule C that show a loss, the IRS may look into this further because it looks like you could be flowing through hobby losses as a business loss. The IRS will require you to prove that this is a legitimate business if they audit you for this reason.
5. Low Income with large deductions: Many times, when small businesses report low income and large deductions, they tend to be claiming more than is actually allowed. While this could be legitimate, especially for newly formed companies or companies with not-so-great years, the IRS may look into this further.
6. Claiming a loss on the business: Claiming a loss on a business is a red flag right away because this means that no taxes will be paid on the business, and the IRS thinks that you may take deductions that are not allowed in order to pay any taxes. As you can see, there is a common theme with red flags and small businesses.

If your tax return has audit red flags, it doesn’t mean that you have done something wrong. Your return is often perfectly fine, but statistically speaking, from the IRS perspective, it is in their best interest to investigate a bit further. Being aware of common IRS audit red flags can help you ensure you keep proper documentation on items the IRS considers flags.

Is filing late a red flag to the IRS?

Not necessarily. A late return doesn't increase your audit risk, according to most tax professionals, but consistently filing returns late, especially business returns, can put you on the IRS's radar. If you have unfiled returns, not filing them can lead to a risk of penalties, interest, and/or incorrect tax assessments. In most cases, it's better to come forward proactively, file the back taxes, and make payment arrangements with the IRS. The idea that filing late will trigger an audit is a myth.

Luckily, you don't have to worry too much about whether or not the IRS is going to audit your tax return. If they decide to do that, they'll send you an audit letter and communicate with you along the way. To ensure you don't miss anything, keep your address updated with the IRS. 

If you are looking for a licensed tax professional to help with a tax audit, review this list of tax professionals who have experience resolving IRS audits or start a search below and click "audit or examination" using the filter on the search page called "IRS Problem Experience." If you're dealing with an audit, you can hire an IRS audit attorney, a CPA, or an enrolled agent.

IRS Failure To Pay Penalty: What to Know

If you don’t pay your taxes on time, in full, or at all, the IRS will assess a failure-to-pay penalty (FTP). Many people in this situation are scared to contact the IRS, or they decide not to file the tax return after finding out what they owe. This is not a good idea. There are serious consequences for unfiled or delinquent tax returns. As of 2026, the IRS will automatically remove failure-to pay penalties for qualifying taxpayers, but if you don't qualify for automatic relief, you should consider reaching out to a tax professional for help. 

Remember, the IRS wants to work with you. If you set up a payment arrangement, the IRS cuts the FTP penalty in half. If you cannot afford a payment plan with the IRS, there are other options to consider.

When Does the IRS Charge the Failure to Pay Penalty?

The IRS assesses the failure-to-pay penalty anytime you pay your taxes late. A late payment refers to one that is after the regular due date. Remember, filing an extension, does not extend any payment due date, only the filing one. This penalty applies the very first day your taxes are late (generally after April 15th), and the IRS assesses this penalty monthly up to a maximum of 25% of the total tax owed or until the tax is paid in full.

How Much is the IRS Failure to Pay Penalty?

The FTP penalty ranges between 0.25% to 1% of the unpaid or outstanding tax amount, per month. For example, if you owe $5,000, and your penalty is 1%, that equates to $50 for the month. Ultimately, the total FTP charges can amount to up to 25% of your balance.

The standard FTP penalty is 0.5% a month. If the IRS issues an intent to levy notice and you don’t respond, the penalty increases to 1% after ten days. If you enter into an installment agreement, this IRS tax penalty falls to 0.25% a month.

What’s the Difference Between the Failure-to-Pay and the Failure-to-File Penalty?

If you do not file your taxes, the IRS charges a failure-to-file penalty (FTF). The FTF penalty is 5% of your balance per month up to a max of 25% of your unpaid taxes. The IRS reduces the failure-to-file penalty in any month where the failure-to-pay penalty applies. Five percent is the maximum amount the IRS charges when these two penalties occur in the same month. However, if fraud is involved, the penalties are higher.

How Is the FTP Different From an Underpayment Penalty?

The IRS assesses the FTP penalty when taxes assessed remain unpaid after the payment due date. Generally, when you hear the term, “underpayment penalty,” this refers to taxpayers who failed to make estimated tax payments or didn’t pay enough in estimated taxes throughout the year. The IRS requires taxpayers who do not have sufficient withholdings throughout the year to make estimated tax payments or face an underpayment penalty. You can avoid the underpayment penalty if:

• You owe the IRS $1000 or less after subtracting estimated tax payments and/or withholdings you had during the year
• If the IRS has 90% of what you owe for the current year, or 100% of what you owed for the previous year, whichever is smaller
• Note: The 100% in the former rule becomes 110% if your adjusted gross income is $150,000 or more ($75,000 if married filing separately)

What Is the Interest on Unpaid or Underpaid Taxes?

In addition to penalties, the IRS assesses interest on all unpaid taxes owed. The interest rate can change every three months, and it is the federal short-term rate plus an additional 3%.  As of 2017, the federal short-term rate fluctuated between 0.98 and 1.29%. That makes the interest rate on unpaid taxes between 3.98 and 4.29%, but it can be higher than that in some years. You can find the Applicable Federal Rates here.

The interest on unpaid taxes compounds. That means that once interest and penalties accrue, the interest gets assessed on those amounts as well as on the original tax owed.

Removing the Failure to Pay or Late Payment Penalty

The IRS offers penalty abatement for some taxpayers. In fact, automatic first-time penalty abatement is available for the first year you incur the FTP penalty.  To qualify, you must have paid on time for the past three tax years. If you don't qualify for automatic first-time abatement, you must show the IRS that you had “reasonable cause” to pay late. The IRS accepts a wide range of reasons, and the agency handles each situation on a case-by-case basis. If you would like to read more about this, the IRS offers a publication reviewing penalties.

What If You Can’t Pay the IRS in Full?

If you cannot pay the IRS in full, there are a wide range of solutions for you. Setting up a payment arrangement with the IRS you can afford is one way to avoid enforced collections with the IRS. Furthermore, it also cuts the failure-to-pay penalty in half. If you have financial issues, you can look into obtaining a hardship status from the IRS or apply for an Offer in Compromise. Whatever the case, it is always a good idea to consult with a licensed tax professional. You can find one by going here. 

To avoid owing taxes in the future, figure out why you owed a tax bill for the year you got behind. Then, take steps to avoid this situation with your future years' returns. For example, if you owe taxes because your boss didn't withhold enough from your paycheck, set up a payment plan, but also update your W4 so that your employer withholds more in the future. In contrast, if you ended up with a tax liability for a situation that isn't recurring (for example, you sold some investments), then you don't need to worry about changing anything for future years. 

IRS Taxes and Chapter 7 Bankruptcy Requirements & Details

Chapter 7 applies to individuals who cannot make consistent monthly liability payments regardless if the individual is solvent or insolvent. With a Chapter 7 bankruptcy, you can discharge some taxes, but first, you need to liquidate your non-exempt assets. The definition of non-exempt assets varies from state to state, but generally, you can keep homes with a moderate amount of equity, a vehicle, and your personal belongings. Typically, filing Chapter 7 takes 90 to 180 days, and it costs a few hundred dollars in administrative fees.

Chapter 7 Bankruptcy Requirements to Discharge IRS Income Taxes

The IRS only discharges taxes in bankruptcy if the taxes owed meets certain conditions. If you do not meet these or if you miss a deadline even by a day, the tax may be due at the end of your bankruptcy proceedings. Here are the conditions:

• Only Income Tax — You can only discharge income tax through a Chapter 7 bankruptcy. You cannot usually include payroll taxes, business sales taxes, excise taxes, or other types of taxes.
• At Least Three Years Old — This is the three-year rule. You can only include taxes that are at least three years old. The clock starts on the return due date. That is usually April 15 of every year. If you request an extension, the three-year period begins on the tax-filing extension due date. That is usually October 15.
• Filed at Least Two Years Ago — You must have submitted the tax return associated with the taxes owed at least two years ago. For example, you cannot file an old return from three years ago and include that taxes owed in bankruptcy the following week. In this situation, the tax is old enough, but the filing is too recent.
• Not From a Substitute Return — A substitute return is when the IRS files a return on your behalf. You cannot include taxes from a substitute return in your bankruptcy. You must file the tax return yourself.
• Assessed at Least 240 Days Ago — If the IRS makes changes to your return or adds to your unpaid taxes that is a tax assessment. You can only include assessed taxes if the assessment occurred 240 days ago or more.
• No Fraud or Evasion — If you are convicted of tax evasion or fraud, you cannot include taxes in your bankruptcy.

On top of these requirements above, you must prove to the courts that you have filed the last four years of tax returns. You also need a copy of your most recent tax return. Unfortunately, if you have any tax liens, a Chapter 7 bankruptcy will not get rid of them.

General Requirements to File for Chapter 7

To qualify for Chapter 7, you also have to meet some additional criteria. Here are some of the most important requirements:

• Your current monthly income over the last six months is equal to or below your state’s median income for your family size.
• You take a means test to determine whether or not you have the ability to pay some of your back taxes and liabilities with your disposable income. If you pass the means test, you may need to file Chapter 13. With Chapter 13, you make repayments on your liabilities for a certain amount of time.
• You complete credit counseling with a government-approved nonprofit organization.
• You complete a “Statement of Financial Affairs” form for the courts.
• Provide a copy of your most recent tax return to the bankruptcy court (sometimes they may ask for the last two years).

It is essential that if you file for bankruptcy that you do not incur additional liabilities. In other words, you may need to adjust or make estimated tax payments or adjust IRS withholding, so you do not continue to accrue taxes.

Documents You Need to Provide Bankruptcy Trustee

To prove many of the requirements above, the official appointed to your case (aka bankruptcy trustee) will need documents required by section 521 of the bankruptcy code. Alternatively, you may file them with the court (depends on local practices).  As discussed above, your trustee usually will request these documents (although your trustee’s document demands may be different):

• Copy of your most recent tax return (sometimes the last two years)
• Previous 2 months of bank statements
• Last two months of pay stubs

Other Documents Your Trustee Might Request

Your trustee, in most cases, may request additional documents from you. Therefore, it is in your best interests to have these documents available. Some of these documents include:

• Mortgage statements
• Bank statements past 60 days
• Investment account statements
• Retirement account statements
• Pension account statements
• Car loan statements
• Life insurance statements
• Divorce or marital settlement-related paperwork
• Appraisals of your car, house, or other property
• W-2s, 1099s, receipts for expenses

Discharge At the End of Chapter 7 Bankruptcy 

Once your Chapter 7 bankruptcy comes to a conclusion, you will receive a discharge of your liabilities. In other words, for those liabilities that are dischargeable, you will not be personally liable anymore. In regards to taxes, if you meet the specific rules above, then you will not owe the taxes anymore. However, the circumstances and facts of each case largely determine whether you can discharge your taxes and other liabilities.

Because it has such serious consequences on your credit, you should only pursue bankruptcy as a last resort. Moreover, bankruptcy doesn’t get rid of trust fund penalties or several other types of taxes. Before filing for bankruptcy, make sure to explore all other options. It is recommended you reach out to a tax attorney and bankruptcy attorney. You can start your search here for tax attorneys that help with tax bankruptcy, or start your search below for the best tax professional to help with your unique tax situation.

IRS Equitable Relief: Requirements for Qualification (Section 6015f)

IRS Equitable relief is the most general type of relief under the innocent spouse relief program. This program can give you relief from joint and several liability from taxes on a married filing jointly return, but it is subject to a lot of interpretation. 

The IRS automatically considers this option for people who don't qualify for innocent spouse relief or separation of liability relief. You can also apply directly to this program if you know that you don't qualify for the other types of relief.

This is a complicated program, and for best results, you should work with a tax pro who has extensive knowledge of the income tax laws in relation to a joint return. This is one of the 10 most litigated tax issues. In other words, innocent spouse and equitable relief claims are more likely to go to tax court than most other tax issues.

What Is IRS Equitable Relief?

Equitable relief is when the IRS decides that it's unfair to hold you responsible for your spouse or former spouse's tax debt on your joint return. This form of innocent spouse relief is the only one that allows you to get relief from an underpayment of tax when your spouse doesn't pay the tax. It can also apply to an understatement of tax on your joint return. Here are some concepts that you should understand before you ask the IRS to grant equitable relief to you.

What Is Underpayment Vs Understatement of Tax?

The other types of innocent spouse relief primarily focus on the understatement of a tax liability. This happens when someone doesn't report all of their income or when they claim excess credits to reduce the amount of their income tax liability on their tax return. As the requesting spouse, you can ask for relief if your spouse or former spouse understated the tax.

An underpayment of tax is a situation where the amount shown on the return is correct but the taxpayer fails to pay the full amount. For example, imagine that you (the requesting spouse) gave your former spouse $5,000 for your tax debt, but your former spouse spent the money on gambling. In this type of situation, you can ask for relief on the unpaid income tax liability. IRS equitable relief is the only spousal relief program that lets you request help with unpaid tax caused by your spouse or former spouse.

Who Is the Requesting Spouse?

The requesting spouse is the one who applies for innocent spouse relief. When you are a requesting spouse, you have to establish why you deserve this type of relief. The other spouse or former spouse is called the non-requesting spouse. Both of you filed a joint return together.

What If My Spouse Doesn't Pay Tax?

 As explained above, this is the only type of spouse relief that can help you if your spouse doesn't pay the tax debt that you owe from your joint return. Generally, the other types of spousal relief focus on separation of liability relief.

Separation of liability relief is when the IRS breaks down the income reported in your return to figure out which part of the tax debt is owed by you (the requesting spouse) versus your spouse or former spouse. Then, you're only responsible for your portion of the bill plus anything stipulated in your divorce decree. If you live in a community property state, the community property law as well as your divorce decree can affect how this plays out.

However, separation of liability relief doesn't have to come into play in this program. With this program, even if part of the tax bill was yours, you may be able to get relief if your spouse didn't pay the bill.

What Does the IRS Consider When You Apply for Equitable Relief?

Whether you're applying for equitable relief because your spouse understated the tax or didn't pay the tax, the IRS will start by considering the following seven factors:

• The marital status of the requesting spouse. Unlike innocent spouse relief focused on liability seperation, you don't have to be divorced to get equitable relief, but it can help your case. However, if you want streamlined approval, you must be divorced or no longer married.

• If you will experience economic hardship if the relief isn't granted.

• If you know about the situation that caused the understatement or underpayment of the tax. You don't necessarily need actual knowledge.

• If you or the non-requesting spouse had a legal obligation to pay the tax debt. For instance, if your divorce decree stipulates that one of you should pay it.

• If you received a significant benefit. Even if you didn't have actual knowledge about the issue, the IRS may not grant equitable relief if you received a significant benefit.

• If you are generally compliant with tax reporting and payment requirements.

• Your mental and physical health.

These are not the only elements the IRS considers. Remember, this is a subjective part of the law, and the IRS looks at multiple elements to assess fairness. The following sections cover more about the requirements for equitable relief.

Conditions to Qualify for Equitable Relief

In order to qualify for equitable relief, you must meet all of the following conditions:

You Do Not Meet the Requirements for the Other Types of Innocent Spouse Relief.

In other words, you do not qualify for innocent spouse relief or separation of liability relief. Again, if you request relief from these programs and get denied, the IRS will automatically see if you qualify for relief under this program.

With All Circumstances and Facts Considered, the IRS Determines It Is Unfair to Hold You Liable

It would be unfair to hold you liable for the understatement or underpayment of taxes. To establish this fact, the IRS may take into account the following factors. These are essentially a repeat of the elements listed above:

• Your marital status

• If you knew or had reason to know when signing the return about the items causing the understatement. With an underpayment situation, whether the requesting spouse had reason to believe his or her spouse or former spouse would pay the taxes. You may be able to get partial relief if you only knew about some of the issue.

• Whether you would suffer economic hardship without relief. Hardship refers to an inability to pay reasonable basic living expenses.

• If there is a legal obligation under the divorce decree or agreement to pay the tax from your joint income tax return.

• Whether you received significant benefit from the unpaid tax or understatement of tax.

• Your mental and physical state when you signed the return or at the time you requested relief.

• To whom the tax interest and penalties are attributed. Normally, you have joint and several liability with a joint return, but again, when you request relief, the IRS looks past the usual law to see what's fair.

• If you made an effort to comply with income tax laws following the taxable year or years to which the request relates.

• If your spouse or ex-spouse abused you. If you are in an abusive situation, consider calling National Domestic Violence Hotline at 1-800-799-7233.

You and Your Spouse/Ex-spouse Did Not Transfer Assets to Deceive the IRS or Another Third Party

In other words, your spouse/expose and you didn't transfer assets to each other to avoid taxes or to deceive someone other than the IRS. However, if you only own the property due to a community property law in your state, this doesn't apply. Similarly, you can get an exemption from this rule if your ex-spouse was abusive or if you weren't aware that the property was transferred to you.

You Didn't File or Fail to File a Tax Return With the Intent to Defraud

If you filed an incorrect tax return (signed it) or failed to file a tax return at all, you must not have had the intention to commit fraud. A fraudulent scheme is when you intend to cheat on your taxes. A mistake is not the same as a fraudulent scheme.

The Taxes That You Want Relief From Relates to an Item Attributed to Your Spouse.

There are a few exceptions to this rule:

• You did not know that funds meant for payment of tax were misappropriated by your spouse/ex-spouse.

• The item is yours only due to common property laws.

• You can prove that you were a victim of abuse before signing the tax return. You must also show that you didn't challenge any items on the tax return because of fear of your spouse.

• Item(s) is in your name but you can prove that it is not actually yours.

• You establish your spouse or former spouse's fraudulent activities are the reason for the errors on the tax return causing the tax understatement.

Your Request Must Be Within Respective Statutory Time Periods

• If A Balance Is Due, You Have to File Within Time Frame IRS Has to Collect – If you have a balance due, the IRS generally has 10 years from the date of assessment to collect. Therefore, if you have a balance due you need to file Form 8857 within the time period the IRS can legally collect.

• Generally, 3 Year Time Limit for a Credit or Refund – If you are requesting a refund or credit for taxes paid, you must file the request within 3 years after the date the tax return is filed or 2 years following the payment of tax, whichever is later. However, exceptions exist for those in a federally declared disaster area or those mentally unable to manage their finances.

• If You Have a Balance Due and a Credit or Refund – The time periods discussed above apply for any credit or refund for any payments made. Moreover, the collection time period (generally 10 years) will apply for a balance due to unpaid taxes.

Refund Limits with IRS Equitable Relief

There are a few exceptions and cases where you may be able to get a refund.

• If the IRS grants you relief related to an understatement of tax, the IRS may grant a refund on payments made through a payment plan. You must have made the payments after you applied for innocent spouse relief. Moreover, you cannot have defaulted on your payment agreement. The payments must be related to the tax or penalty for which you are seeking relief.

• If you receive relief for underpayment of tax, you can receive a refund on payments you have made. You must have made the payment on your own and not with your spouse. There are time restrictions on these payments and their eligibility for a refund.

Can You Reapply for Equitable Relief IRS After a Denial?

In most cases, the only reason to reapply for equitable relief after a denial is if your situation has changed. For instance, if you are no longer married, you may want to reapply. For best results, you should contact a tax pro who has experience with the IRS's equitable relief program. They will be able to let you know if equitable relief is the right option for your situation. If not, they should be able to help you explore other options for dealing with unpaid taxes or the income tax liability of your spouse or former spouse.

Equitable relief is a great form of relief, but it can be challenging to get this type of innocent spouse relief. Even if a taxpayer meets the eligibility requirements there is no guarantee that the IRS will approve the relief request. It is best to work with a tax professional when filing for this type of relief. Here you can find a list of tax professionals who have experience with innocent spouse cases. Or you can start your search below using the applicable filters.

Help With Innocent Spouse Relief: Relief from Joint Liability

Do you need help with innocent spouse relief, equitable relief, or separation of liability? Not sure if you qualify? Need help understanding the detailed requirements? You can find a list of tax professionals that have experience with innocent spouse relief here. At TaxCure we have a large network of professionals that specialize in tax problems and tax solutions. Our algorithm helps you find the best professional based upon your unique needs. Check out the results and find the best professional to help. Click the aforementioned link or start your search below.

Various licensed tax professionals specialize in innocent spouse relief, and they know exactly what criteria you need to get your request accepted. Furthermore, these professionals can analyze your situation and let you know if you are a good candidate for relief. If you qualify, they can file all the documents and deal with the IRS and/or state for you.

If you are not a good candidate for innocent spouse relief, they can suggest other options for settling your taxes and resolving your problems with the IRS and/or State.

How a Tax Professional Can Help with Innocent Spouse Relief

A tax professional improves the chances that your request for relief will be accepted and whether you qualify (so you don't waste money or time). Consequently, if your request is rejected, requesting relief for the same year(s) will be difficult. That’s why it’s important to file correctly the first time.

Here are some advantages to using a tax professional for innocent spouse relief help:

• The IRS and many states actually prefer working with a tax professional. As a result, tax professionals make the jobs of IRS/State employees easier.
• A tax professional can stop collection activities such as wage garnishment or asset seizure. Realize, that as soon as the professional puts in your application for relief, all collection activity stops.
• A tax professional can help you decide if your request for relief is likely to get approved and can help you with the process.
• Tax professionals understand all the rules and requirements. You don’t have to worry about reading confusing instructions and filling out long forms.

How Innocent Spouse Relief Service Usually Works

Many tax professionals will give you a free no-obligation consultation to determine if you are a great candidate for Innocent Spouse Relief, Equitable Relief, or Separation of Liability Relief. The consultation generally carries no obligation. Many professionals start off with an investigation, which will confirm what you owe, penalties and interest assessed, as well as any required tax return filings. Finally, a tax professional will provide guidance on tax programs you may want to pursue.

Second, you will obtain a cost estimate for the tax services needed to get into compliance and into a resolution with the IRS and/or State. This estimate will break down the services required to get you into compliance and into a resolution with the IRS and/or State.

Third, if you decide you want the tax services, a tax professional official can represent you with a completed power of attorney submitted to the IRS or the state taxation authorities. Consequently, this process stops the IRS (and/or State if you submit a State POA) from contacting you and routes all communication through your hired tax team.

Fourth, your licensed tax team will file all required forms and documentation. You may need to retrieve certain documents required for your tax resolution or tax filing.

FAQs for IRS Innocent Spouse Relief

Here are some frequently asked questions regarding IRS Innocent Spouse Relief. Feel Free to send us a question that you don’t see answered here.

What is the IRS Innocent Spouse Rule?

The IRS Innocent Spouse Rule provides an exception to the joint and several liability on a joint return. Normally, both spouses are responsible for the tax due on a joint tax return. However, if your spouse omitted income or didn't pay the tax bill and you were unaware of the situation, you may qualify for relief. 

What is equitable IRS relief?

The IRS will also grant innocent spouse relief in situations where a reasonable person would think that it's unfair to hold you responsible. This is called IRS equitable relief. If you don't qualify for the other types of innocent spouse relief, you should look into equitable relief. It's also the only option if your spouse underpaid the tax. 

What qualifies for Innocent Spouse Relief?

You can request innocent spouse relief if your spouse or ex-spouse underreported or underpaid federal income taxes on a jointly filed tax return. Underreported means that the spouse or former spouse didn't report all of their income or claimed excess credits to lower (or underreport) their tax due. Underpayment is when your former spouse didn't pay the tax due that was shown on the return.

How does the IRS define actual knowledge?

You may hear this phrase when applying for innocent spouse relief. If you actually knew about the error made by your spouse, you have “actual knowledge”. You don’t qualify for innocent spouse relief. Both you and your spouse are still liable. However, you don't need to know all the details to have actual knowledge. For instance, say that you knew your spouse had $20,000 in income that they didn't report on your joint return, but you weren't sure how they earned the income. This counts as actual knowledge. 

What if you have actual knowledge but you signed under duress?

You may be able to get separation of liability even if you had actual knowledge of the understatement. For example, imagine that you knew your ex-spouse wasn't reporting income, but you were afraid to say anything so you signed the return. When reviewing your request for relief, the IRS will take into account the fact that you signed under duress or were coerced into signing. 

What is the deadline or time limit for filing for Innocent Spouse Relief?

In most cases, you must file for innocent spouse relief no later than two years after the day the IRS first tried to collect the tax from you. However, there are exceptions.

If you are applying for equitable relief related to taxes owed, you have up to 10 years from the date the tax liability was assessed. If you are applying for a credit or refund under the equitable relief program, you have until the later of three years after the date of assessment or two years after the payment was made.

How can I find tax professionals that specialize in innocent spouse relief?

Here at TaxCure, we have a network of tax professionals who give details on the type of work that they specialize in. We then have an algorithm that ranks those pros based on those specialties to help taxpayers find the best pros for their unique situation. You can follow this link here to see the top-rated innocent spouse relief experts, or you can start your search below and apply the applicable filters to your search.

How does the IRS define “reason to know”?

This is another common phrase when applying for innocent spouse relief. “Reason to know” refers to cases where the IRS believes it’s reasonable that you knew about the issue. For example, if you knew about related facts or information, the IRS may assume that you also had reason to know about this issue. If you had reason to know, you cannot qualify for innocent spouse relief.

What does benefiting from the understatement of tax mean?

In some cases, the IRS may claim that you had a reason to know because you benefited from the understatement of tax. Say that your spouse was earning $80,000 from a side business that they were not reporting to the IRS. You claim that you didn't know about the money. However, your family lived well beyond its means. Due to the extra income, you went on several vacations every year and bought an expensive boat. This means that you benefited from the understatement of tax, and the IRS may deny your request for relief. You can benefit either directly or indirectly. 

Can you apply for innocent spouse relief if you're still married?

You may be able to apply for classic innocent spouse relief or equitable relief if you are still married. To apply for separation of liability, you must either be divorced or not living in the same household for at least 12 months. You can't apply for this type of innocent spouse relief if you're still married and living together. In all cases, however, the IRS takes into account your relationship when reviewing your application. 

What does the IRS mean by members of the same household?

To qualify for some type of relief, you must not be a member of the same household as your spouse/ex-spouse. You and your spouse are not members of the same household if you are living apart. However, if you are still romantically involved or if your spouse is likely to move back, the IRS considers that you are still members of the same household.

What are erroneous items?

Erroneous items can be unreported income or incorrect deductions and/or credits, or incorrect cost basis for capital gains or losses. For example, imagine that your spouse claimed a $10,000 deduction for advertising expenses for their business, but they never actually paid for that much advertising. That is an example of an erroneous item for an innocent spouse claim. 

What type of taxes qualify for innocent spouse relief? 

You can only apply for innocent spouse relief on individual income tax and self-employment tax. For example, if you owe household employment taxes for a cleaning person or nanny, you cannot apply for innocent spouse relief on those taxes. You also cannot apply this type of relief to business taxes or trust fund recovery penalties for employment taxes. 

Will the IRS contact my former spouse?

If you file for innocent spouse relief, the IRS will contact your former spouse and give him or her the option to participate in the process. There are no exceptions to this rule, even if you were a victim of abuse. However, the IRS will not reveal your contact information to your ex-spouse. Note that if your request is denied and you appeal to the Tax Court, your personal details may become a public record. To protect yourself, you should work with a tax professional who can help you navigate this situation. 

What forms do I need to file for innocent spouse relief?

In order to file for innocent spouse relief, you have to submit IRS Form 8857. If you were a victim of spousal abuse, you must also submit a letter explaining that. You may also want to submit a letter with extra details in other cases as well. A letter helps you explain why you meet the requirements for relief.

What is an understatement of tax?

An understatement of tax occurs when your return says you owe less tax than you really owe. This usually happens when someone doesn't report all of their income, reports excessive deductions, or claims credits they aren't entitled to. If your spouse understated the tax on your return without your knowledge, you can apply for spouse relief.

What is an underpayment of tax?

This occurs when the total tax amount on the tax return is correct but the taxpayer fails to remit full payment. If this situation, the innocent spouse cannot apply for traditional innocent spouse relief. But they can apply for equitable relief. 

When am I liable for my spouse's tax liabilities?

When it comes to taxes, married couples can file their return jointly or separately. If you and your spouse decide to file jointly, you will both be liable for any tax liability incurred. This means that if your spouse owes back taxes, the IRS can come after you for the money. However, if you file your taxes separately, you will not be held responsible for your spouse's taxes owed.  Ultimately, it is up to you and your spouse to decide which filing status is best for your situation. If you own joint assets and you aren't personally responsible for your spouse's tax liability, your joint assets can still be at risk of levy from the IRS.

Can I get partial innocent spouse relief?

In some cases, you may qualify for partial innocent spouse relief. This comes into play if you know about some of the income your spouse understated but not all of it. To give you an example, imagine that you knew your spouse won $5,000 at a casino but didn't report it. However, you didn't realize that your spouse actually won $25,000. In this case, you can apply for innocent spouse relief on the $20,000 but not the $5,000. 

What is the difference between injured and innocent spouse relief?

Innocent spouse relief is when you apply for relief of a tax bill due solely to your spouse's understatement of tax. It also includes situations where you ask the IRS to separate the tax liability on a jointly filed return after the end of a relationship. In contrast, injured spouse relief applies when the IRS keeps your tax refund to pay for a debt due solely to your spouse.

For instance, if the IRS seizes the refund from your jointly filed return for your spouse's child support or unpaid taxes from before you were married, you can apply for injured spouse relief. File Form 8379 (Injured Spouse Allocation). If the IRS approves your request, your share of the refund won't be seized for your spouse's debt. 

If I qualified for an offer in compromise, can I still qualify for innocent spouse relief?

No, you cannot qualify for innocent spouse relief if you already qualified and settled your taxes with an offer in compromise. If you've already applied for an offer in compromise for the tax year in question, you should not also apply for innocent spouse relief. 

How many years can my innocent spouse relief filing cover?

Your innocent spouse's relief filing will cover up to six years on the same form. If you want to cover more than six years you will have to file a separate IRS Form 8857 for the additional years.

Applying for innocent spouse relief can be complicated. If you're like most applicants, you probably have a lot of other questions. To get answers to your questions and help applying for relief, contact a tax professional today. Using TaxCure's search feature, you can look for a local tax pro based in your area who has experience with this program. They can answer your questions about IRS innocent spouse relief, and then, they can also let you know if your state has a similar program. 

Useful Articles Related to IRS Tax Appeals

IRS tax appeals are available to those taxpayers that do not agree with particular decisions made by the IRS. The good thing about the office of appeals in the IRS is that it is independent of any other IRS office and is designed where disagreements concerning the application of tax law can be resolved on a fair and impartial basis. Below are some tax decisions that you can appeal. Understand when you can appeal and how you appeal each of these types of decisions made by the IRS. According to IRS statistics, Appeals result in a tax bill that is 40% lower on average.

Appeal an IRS Tax Levy

Once you receive a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” you have 30 days to appeal the decision to levy prior to them taking action. Understand when it is appropriate to consider appealing a tax levy and learn how to request an appeal.

Appeal an IRS Tax Lien

Once a tax lien is filed you will be notified within 5 days. In this notice, you will be given the option to request a hearing. Understand when it is appropriate to request an appeal of an IRS tax lien, how to request the appeal, and who can represent you in the appeal

Appealing an Installment Agreement Decision

Appealing an IRS Installment Agreement (IA) is within your rights as a taxpayer if it is denied or rejected, terminated, or proposed for termination. Understand how to appeal a rejected installment agreement, common reasons for rejection, and how to reinstate the installment agreement.

Appealing an Offer In Compromise

You have the right to appeal an offer in compromise that was rejected by the IRS within 30 days of the date on your rejection letter. Understand some steps or guidelines to follow when requesting an appeal.

IRS Form 12153 – Filing a Collection Due Process Hearing (CDP)

If you receive a notice of intent to levy or a notice of federal tax lien, you have the right to file an appeal. With lien and levy notices, the IRS will send your rights to a hearing. Understanding if you should file a CDP hearing and how to do so.

IRS Collection Appeals Program & Form 9423 (CAP)

How the IRS Collection Appeals Program works to help you resolve your tax problem with the IRS. Details on how and when the CAP process can be used. Details on how to request it and how to use form 9423.

If you are looking to appeal an IRS decision or enforced collection action with the help of a tax professional, you can see qualified a list here, or you can start your search below.