Sharing a last name and a 1040 tax return can have its downsides. That’s where Injured Spouse Relief offers you an alternative.

Most of the time, filing a joint tax return yields a lot of benefits, including tax breaks and credits, including the earned income credit and student loan interest deductions. However, married filing jointly can have its downsides, such as something called “joint and several tax liability”. That means if your spouse underreports income, the IRS holds you both responsible.

If something your married partner did led to a tax refund being substantially less than you expected and you earned income or a tax credit, then it might be time to grab the Injured Spouse Form.

If you get a Notice of Offset, you might be invited to file the form. (A Notice of Offset means the IRS took a cut of your federal income tax refund to pay for something your tax return didn’t account for.)

An injured spouse is someone whose tax refund is used to cover financial obligations of a current or former spouse. You are an injured spouse if your share of the overpayment shown on your joint return was, or is expected to be, applied (offset) against your spouse’s legally enforceable past-due money owed.
To be considered an injured spouse, you must have:

• Paid federal income tax
• Claimed a refundable tax credit, such as the Earned Income Credit in Notice 797 or Additional Child Tax Credit on the joint return
• Not be legally obligated to pay the financial obligations of the spouse

What kind of unpaid financial responsibilities could you get relief from with Injured Spouse Form 8379?

• Federal taxes
• State income taxes
• State unemployment compensation financial obligations
• Child or spousal support payments
• Federal nontax owed balances, such as defaulted student loans

When the IRS applies a person’s refund to past taxes owed, they will mail a formal Notice of Offset to the taxpayer’s address. At this time, the taxpayer whose refund was seized or offset has the opportunity to file an injured spouse claim. The IRS has up to 14 weeks to respond, so your refund may be delayed for quite a while.

Community property states follow the rule that all assets acquired during the marriage are considered “community property”. Special rules might apply to injured spouse relief in community property states:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.

There’s another form of relief for someone in a married filing jointly tax return: Innocent Spouse Relief. It can be offered when your current or former spouse fails to report income, reports income improperly (i.e. lied to the federal government by hiding or misreporting income), or claims improper deductions and credits.

If you had no idea about this understatement at the time you signed your tax return form, you might qualify for Innocent Spouse Relief.

Innocent spouses face more serious problems than injured spouses. When you complete a tax return, you sign your return with penalties under perjury. Even if you were unaware of your spouse’s understatement, the IRS counts this misrepresentation as tax fraud and imposes serious consequences for it. Legally, if the IRS suspects fraud in your joint return, it can:

• Audit You: An IRS audit is an extensive review of your taxes and financial records to ensure you reported everything correctly. Undergoing an audit is a time-intensive and costly process. It demands years of documentation and, at times, even in-person interviews. Most people need to hire a professional to represent them during an audit.
• Impose Penalties and Fees: Even if you file on time, you may still be charged a late payment penalty if your spouse underreported their income and the IRS finds out. They can also charge interest on the underpayment as well. The IRS can charge steep fines for fraud, up to $250,000.
• Make Criminal Charges: Besides potentially owing thousands of dollars, the IRS can make criminal charges for tax fraud, a felony punishable by up to five years in prison. If you’re investigated, the chances of getting arrested are pretty small—less than 20 percent—but approximately 3,000 people per year are convicted for tax fraud.

For relief of liability from the above penalties, you can file an Innocent Spouse claim. The Innocent Spouse Rule stipulates that you must have signed and filed a joint return without full knowledge of your spouse’s true financial situation. Married persons who did not file joint returns, but live in community property states, may also qualify for Innocent Spouse Relief.

For injured spouse relief, you need to submit Form 8379, Injured Spouse Allocation, by paper or electronically.

Essentially, this form asks the IRS to pay attention to which member of the couple has a refund and which has the financial obligations. It’s like getting some of the benefits of married filing separately. You can submit Form 8357 alongside your joint tax return, or file it separately after receiving your Notice of Offset.

If you file an injured spouse claim included in your tax return, the IRS will process your request for allocation prior to offsetting funds. Include Form 8379 and write “INJURED SPOUSE” on the top left corner of your Form 1040, 1040-A, or 1040-EZ.

For circumstances in which you were unaware of your spouse’s past financial obligations and are seeking injured spouse relief after your refund was seized, be sure to include both your and your spouse’s Social Security number as it appeared on the return in the paperwork. Only you, the injured spouse, needs to sign.