Innocent Spouse Relief Common Terms and Definitions

Appeal - Requesting that the IRS or state agency review their decision or make an adjustment

Back Taxes - Taxes that are due but have not been paid on time.

Collections - Any action taken against an individual to ensure that tax amounts owed are collected.

Earned Income - Gross salary, commissions, fees, wages etc, which are received from a job or occupation. Does not include investment income, rent, or annuity amounts received.

Erroneous Items - These include unreported income and incorrect deductions.

Incorrect deduction - When your spouse or former spouse claims false deductions.

IRS Bank Levy - If you are delinquent in paying your taxes, the IRS can seek a levy on your bank account.  This will effectively freeze the funds in your account for seizure.

IRS Payment Plan-The IRS encourages tax payers to pay quickly, but for the individuals or businesses that have no other alternative the IRS may allow for a payment agreement for past due taxes.

Innocent Spouse Relief -Is a form of tax relief available from the IRS that was created from filing a joint tax return that you filed with your spouse or ex-spouse. Is available to those who meet specific requirements set forth by the IRS.

Internal Revenue Services - Also known as the IRS. This is a government body that is responsible for determining, assessing, and collecting taxes.

Joint Filing - When a married couple files their tax return on a single tax return. All income and deductions are combined.

Levy -When a persons assets are taken for the sole purpose or repayment of debts. This happens in extreme cases of tax debt cases.

Lien - A legal claim that attaches to one’s property as security for repayment of a debt. This is for the purpose of making an individual pay the amounts owed because this lien will make it near impossible to sell or transfer the piece of property.

Members of the same household - You must not be members of the same household. The IRS will determine that you are part of the same house hold if you meet any of the following criteria:
-You and your spouse still live or reside in the same dwelling
-You both live in different place, but are not really separated
-If one spouse is currently absent from the household but it is likely to return. This can mean that they are in prison, absent for educational purposes, on vacation, is sick and is in the hospital, is in the service and is currently on tour, etc.

Offer in Compromise - Is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt.  The IRS has the authority to settle federal tax liabilities by accepting less than full payment under certain circumstances.  Taxpayers may be able to take advantage of the Offer in Compromise if they are not able to pay a tax debt in full or an installment agreement

Reason to know - Under innocent spouse rule, if you had reasons to know about erroneous items that belong to our spouse, or former spouse, innocent spouse relief will not apply.

Relief By Separation of Liability - Under this form of tax relief, the underpayment of tax is separated between you and your spouse or former spouse.

Separate Filing Status - When a married couple file separate returns from each other, therefore reporting individual income and individual deductions and allowances. This option makes a spouse responsible for payment only of his or her own taxes.

Single Filing Status - Filing a tax return as an unmarried or legally separated.

Tax Avoidance - Attempts to minimize tax liability through legal means.

Tax Liability - The amount owed to the IRS from revenue received during a given period of time.

Tax Debt Consultation - A service offered to provide individuals with information regarding their particular situation, as well as possible solutions and outcomes.

Tax Lien - A claim imposed by the government against a piece of real estate caused from unpaid taxes. The claim is imposed until the tax liability is paid.

Underpayment of Tax - An underpayment of tax is an amount that you properly reported on your tax return but you have not paid the amount in full. For example your tax return stated that you owed $3,500 and you have only made a payment of $1,000. The difference of $2,500 is the underpayment of tax.

Understatement of Tax - Is the difference between the total amount of tax that should have been shown on your return and the amount of tax that was actually shown on your return.

Unfairness to hold liable - Based on the given situation, the IRS will determine if it would be unfair to hold you liable for the tax amount that is owed. They may consider factors such as: was the amount of benefit you received from the understatement a significant amount, if your formers spouse left you and made it so you did not have the means or assets needed to pay off the liability, if you are separated or divorced, if you would suffer significant financial hardship if you did not receive relief, if you had a legal obligation under the divorce decree to pay the tax amount owed, if you made an effort to follow federal income tax laws, if you knew about the items causing the understatement of tax, or any other reason the IRS thinks would be relevant in your given situation.

Unreported income - The gross amount of income received from you spouse or former spouse that wasn't reported.

W-4 - Is the form used to figure out the amount of income tax to have withheld from your paycheck, which is called your withholding allowance.  This represents your total tax deductions divided by the personal exemption rate