Equitable Relief

!: Equitable Relief

Equitable relief is normally the final method of relief that is considered under innocent spouse relief. This type of relief is available if you do not qualify for "classic" innocent spouse relief or relief by separation of liability. Under this type of relief, you may be relieved of your responsibility to pay taxes owed, interest, and penalties. This was the last method of innocent spouse created because the IRS realized that there are some instances where a spouse still should not be held liable for the tax amounts owed even if they don't qualify for "classic" innocent spouse relief or relief by separation of liability.

This is the only form of innocent spouse relief where you can receive relief from an understatement of tax or an underpayment of tax. It is considered an understatement of tax if you reported less taxable income than you should have reported. It is considered an underpayment of tax if you filled out your return properly but have not paid the entire amount owed. There are 7 conditions you must meet in order to qualify for equitable relief.
You do not qualify for innocent spouse relief or relief by separation of liability You did not transfer property or assets with your spouse for the purpose of committing a fraudulent scheme. You did not transfer property or assets for the purpose of avoiding paying tax. You did not fail to file your return for the purpose of committing fraud. You did not pay the tax owed You must be able to prove that it would be unfair to hold you responsible for the understatement or the underpayment of tax. This is where the IRS uses it's own interpretation. They consider many things such as if you are divorced, if you would suffer economic hardship, if you had a legal obligation to pay the tax under the divorce agreement, if you received significant benefit from the unpaid item, if you made an effort to follow federal tax laws, if you had any reason to know that the tax amount would not be paid, and they can consider other factors they may see that are relevant. The tax liability that you are seeking relief for, is the fault of your spouse or former spouse.

Equitable relief is the more open ended type of relief offered and the IRS considers the relief based on individual circumstances. There isn't necessarily a set formula to determine if you will qualify, a lot of the qualifications are up to the interpretation of the IRS, especially qualification number 6. Before filing for this type of relief it is important that you understand the qualifications and you must be able to prove each one.

To apply for this type of relief, you must file form 8857 (request for innocent spouse relief), form 12510 (questionnaire for requesting spouse), and you should also send a letter with it to stress and clarify why you qualify.