Tax Newsletter

• Itemized Deductions on Married Filing Separately Tax Returns
  When filing your federal tax return, you usually have the option of taking the standard deduction or itemizing your deductions to adjust your taxable income. However, if you are married but filing separate tax returns and choose to... Read more.
• Elderly and Disabled Tax Credit
  Certain elderly and/or disabled taxpayers may be entitled to a tax credit when filing their federal income tax return. A tax credit can be deducted from the amount of federal income tax owed, as opposed to a tax deduction, which reduces... Read more.
• Income Tax Limitations on the Charitable Deduction
  Taxpayers who make contributions to qualified charitable organizations are entitled to a tax benefit in the form of a charitable deduction on their income taxes. However, the issue becomes more complex when a non-U.S. citizen makes a... Read more.
• Separate Return vs. Joint Return for Federal Taxes
  For federal income tax purposes, there are five tax “statuses:” single; head of household; married filing jointly; married filing separately; and qualifying widow(er) with dependent child. Status affects tax credits and... Read more.

• IRS establishes new pass-through division to tax high earners
• Under-resourcing in global tax and trade increases risk for multi-nationals, garners new Thomson Reuters research
• Alito rejects calls to recuse from tax case after Wall Street Journal interviews
• Employers could offer you tax-free help with your student loan payments. Most are not
• White House knocks Trump proposal for 10 percent tax on products entering US

Innocent Spouse Relief For Tax Liability

Many married couples file joint tax returns to take advantage of certain benefits offered by this filing status. This may result in the unfortunate and unintended consequence of one spouse being held responsible for the underreporting of income by the other spouse. Even when there is a divorce decree stating that one spouse will be solely responsible for any amounts due on prior tax returns, the IRS may withhold a tax refund of the other spouse to satisfy the former spouse’s tax obligation.

When a married couple files a joint tax return and penalties arise as a result of an underreporting of taxable income, the IRS will relieve one spouse from liability if that spouse can prove that he or she is “innocent” of any wrongdoing. In order for the an individual to obtain relief as an “innocent spouse,” the following criteria must be met:

• The return filed must be a joint return, or, if the return was filed while living in a community property state, the return filed may be a “married filing separately” return
• At the time the return was filed, the individual believed the correct amount of tax was, or would be, paid
• The individual’s spouse failed to report or underreported his or her income
• The individual did not have knowledge of the unreported income or erroneous items at the time the return was filed
• It would be unfair to hold the individual liable for the tax deficiency
• The individual applies for relief no later than two years after the IRS’s first attempt to collect the deficiency

If an individual meets the criteria for innocent spouse relief, the individual will be relieved of responsibility for the tax due on the return or any penalties or interest. Depending on the facts and circumstances, the innocent spouse may be eligible for relief of all taxes due on the return, including penalties and interest, or only partial relief.

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