Question

A client has come to you with a problem with items reported by their spouse. Explain the purpose of the innocent spouse provisions? What is considered proportional liability? Equitable relief? What does community property rules affect these provisions?

Answer 1

Before getting deep into the discussion about the proportional liablity, equitable relief, communinty property rules, etc. we should know about what is Innocent Spouse Provisions. Innocent Spouse provisions are the provisions made to protect one partner from another if the former or ex-spouse has done something wrong to another one. If one of the partner is involved into any fraudlent activity and or earning income by the way of fraud then he or she should be having any prove to make it believe. There should be any solid prove proving that the one person has not been involved into anny such activity.

There are three types of relief that you may get while filing for Innocent Spouse Provisions. Innocent Spouse Relief, Seperation of Liablity Relief and Equitable Relief.

Considered Proportional Liablity: As the word explains itself proportionate liability it means that the injured or the plaintiff will be held liable only in the proportion to the damages made by him/her. If the person were found only to have contributed to the 20% damages then the person would be liable to that only.

Equitable Relief: Equitable relief is the relief applied when the person is not qualified under Innocent Spouse Relief and Seperation of Liablity Relief. This is basially applicable when the act has been done or I should say that the income has been generated but the same has not been mentioned in the joint tax return or the tax has not been paid. But apart from this you must establish that it would be unfair to hold you lliable for the acts for some other person. Community Property Laws: These laws differ from place to place and from state to state. If a married couples who file joint returns are not directly affected by community property laws but if the couple is living seperately then it might take a different turn in the perhaps because they are living seperately or are getting a divorce. When a divorce or seperaition ends the marital community everything else ends as well, just for an instance the community property as well. Each of the person is taxed on the half of their community property and not on anything else. Sometimes a seperated spouse might suffer an unfair income tax results if the community property laws is applied then in that case the same can be avoided through the innocent spouse provisions.