Eliminating Joint Tax Filing Could Help Innocent Spouses

A Forbes article by contributor Peter J. Reilly titled “Time to Eliminate Joint Filing?“ proposes whether joint filing is really beneficial to couples. In recent years, Reilly has come to think that joint returns for married couples are not such a great idea especially at a time when the federal government is deciding its definition is of marriage through the Defense of Marriage Act (DOMA). Other reasons for doing away with joint filing have to do with innocent spouse cases Reilly has read and written about. He advocates the individual income tax stating “We have an individual income tax. Let it be on individuals and leave it at that.

His argument for getting rid of joint filing is supported by data from Yale University Professor Anne Alstott’s article titled,”Updating the Welfare State: Marriage, the Income Tax, and Social Security in the Age of the New Individualism.” Alstott’s comprehensive report studied the taxing of couples. Here are some facts Reilly points out from Alstott’s article about the joint tax return:

  • There were no joint returns until 1948.
  • At that time, tax rates on high incomes were steeply progressive.
  • These tax rates created a strong incentive to figure out ways to income split between couples and also advantaged couples in community property states.
  • Congress decided to let all married couples, essentially “split their income.”
  • In 1969, single people received a more favorable rate. Thus was born the “marriage penalty” for couples with little income disparity.
  • The system worked pretty well in the mid-twentieth century, due to the fact that marriage and a gendered division of labor was the norm across large sections of the population.

Getting rid of the joint return could avoid tax problems and quite possibly wipe out the need for the innocent spouse defense. Being someone who handles difficult innocent spouse cases, this could be a good thing. What couples need to understand is that any past tax filing mistakes can come back to haunt them whether they are married or divorced. As I’ve said before, for better or worse, a spouse inherits their partner’s tax history; even if the marital bliss fades, the couple’s tax liability will not.

What is the Innocent Spouse Relief Defense?

The IRS considers couples to be individuals who are joint and severally liable for their tax liabilities. If a spouse makes a mistake on the tax return, the IRS does not hesitate going after both parties to collect taxes, penalties and interest even if the couple has since divorced and the divorce decree states one to be responsible to pay them.

Nevertheless, there are instances where the innocent spouse can get some IRS tax relief. If a spouse was unaware of their spouse’s mishandlings on their joint tax returns, they can request Innocent Spouse Relief. If they qualify, they could be relieved of the unpaid tax, interest and penalties on that return. Note: Innocent Spouse Defense is very complex and places the burden of proof on the taxpayer. Also, not everyone will qualify.

To increase your odds significantly of a positive outcome, it’s best to hire expert tax representation such as a tax attorney or a Certified Tax Resolution Specialist to help you file for innocent spouse protection.

More Tax Help, IRS News and Tax Relief Tips:

  1. IRS Guidelines Help More Innocent Spouses
  2. Filing Joint Tax Returns? Prevent IRS Problems
  3. Treasury Proposes Multilateral Agreement for Offshore Compliance
  4. Swiss Bank Wegelin Avoids Court Appearance
  5. IRS Bankruptcy-Five Tax Relief Options for Back Taxes

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