What is injured spouse relief and who can claim it?

Pensive young couple sitting on couch, wife in the foreground wondering if injured spouse relief can help ensure she doesn’t lose all her tax refund due to her husband’s past-due tax debt. Pensive young couple sitting on couch, wife in the foreground wondering if injured spouse relief can help ensure she doesn’t lose all her tax refund due to her husband’s past-due tax debt. Image:

In a Nutshell

The U.S. Treasury Department has the power to take some or all of a tax refund if the taxpayer is delinquent on certain types of debt.  Even if your spouse is solely responsible for the debt, your shared tax refund could be at risk if you file your tax return jointly. But if the IRS agrees that you’re an injured spouse, you may be able to get your share of the refund.

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“For better or for worse” takes on new meaning at tax time if your spouse owes late court-appointed payments, past-due taxes or certain other types of debt.

When you marry, you and your spouse share many things — including, possibly, your federal income tax return. Past-due taxes or state debts, court judgments and late child support payments are unromantic topics you might not have discussed before tying the knot.

But when you file your first joint tax return as a married couple, you may be surprised if the government takes some or all of your shared refund to pay for your other half’s tax debt.

Fortunately, there’s a possible remedy for certain people in this situation: injured spouse relief.


What is injured spouse relief?

Imagine that you just learned your spouse is six months late on her student loan payments. Perhaps you discover your husband is $5,000 in arrears on child support payments. Or maybe your wife tells you she owes Uncle Sam $2,000 in federal income tax from a few years ago.

If your spouse owes back payments on certain types of debts like these, the U.S. Treasury Department can take some or all your joint refund through the Treasury Offset Program and apply it toward the outstanding balances. The types of debt that the Treasury Offset Program can collect on include the following:

  • Past-due federal taxes
  • Past-due state taxes
  • Late child support payments
  • Late alimony payments
  • Other federal debt such as an unpaid student loan

This can happen even if only one spouse is responsible for the debt.

This is when injured spouse relief can be helpful. If you qualify, you can receive a share of the refund rather than having the entire amount go toward the qualifying debt.

FAST FACTS

How do you know your refund will be garnished?

You will receive an official Notice of Offset. The IRS will issue a Notice of Offset for federal tax debts. The U.S. Treasury Department's Bureau of the Fiscal Service will issue a Notice of Offset for past-due state income tax, state unemployment compensation debt, child or spousal support, or federal nontax debts, such as a student loan.

Learn more about the Treasury Offset Program.

How do you request injured spouse relief?

You can request injured spouse relief by completing Form 8379, Injured Spouse Allocation.

Who qualifies as an injured spouse?

To qualify for injured spouse relief, you must …

  • File a joint tax return with your spouse
  • Have or expect to have all or part of your share of any tax refund put toward your spouse’s past-due debt

By filing Form 8379, you may be able to get back or keep your share of the joint refund.

When should you file Form 8379?

As soon as you know your refund will be affected by your spouse’s qualifying debt, you can file Form 8379. You need to file the form for every tax year in which your refund was affected and for which you want to obtain injured spouse relief.

You have three years from the due date of the original return (including extensions) or two years from the date that you paid the tax that was then offset, whichever is later. Certain circumstances may give you more time to file Form 8379.

How to file Form 8379

Send the form along with your joint tax return or amended tax return. Or you can file Form 8379 on its own after filing your federal income tax return. Follow the instructions on how to file the form. Directions, which are specific, include entering “injured spouse” in the upper left corner of Page 1 of your joint return.

 

How long does it take for the IRS to process Form 8379?

Waiting to hear back if you qualify for injured spouse relief requires some patience.

Generally, if you file Form 8379 with a joint return on paper, the processing time is about 14 weeks. If you file electronically, processing is reduced to about 11 weeks. If you file Form 8379 by itself after a joint return has been processed, the time needed is about eight weeks.

How much could you get back?

To determine your refund as an injured spouse, the IRS will calculate the amount as if you and your spouse had filed separate tax returns instead of a joint return.

That means your wages, self-employment income and expenses, and credits will be allocated to the spouse who would have shown those items on their individual return. Items that don’t clearly belong to one or the other of you — such as a penalty on an early withdrawal from a joint savings account — will be divided equally.

Innocent spouse relief and how it differs from injured spouse relief

Imagine you filed your joint tax return and later learned that your spouse hid $15,000 in side income. Or maybe you applied for and thought you and your spouse qualified for a tax credit, but later learned that it was under false pretenses. Or perhaps instead of a credit, it was a false deduction and you had no clue it wasn’t genuine.

This is when innocent spouse allocation may be available to help the spouse that was unaware of misinformation on a joint tax return. This is different than the injured spouse allocation, which applies in situations where past-due taxes and past-due debts  put a refund at risk.

The two are commonly confused, and the first page of the Instructions for Form 8379 delves into the details of how one is different from the other. Although both types of relief can help you retain some of your joint tax return, the IRS says innocent spouse relief applies if …

  • Your spouse omitted income or claimed false deductions or credits to understate the amount of tax you both owed — and you didn’t know or have reason to know about it.
  • You’re divorced, separated or no longer living with your spouse, and there is an understatement of tax.
  • In light of all the facts and circumstances surrounding your tax situation, the IRS deems it wouldn’t be fair to hold you liable for the tax.

Bottom line

When you say “I do,” you’re probably not thinking much about taxes. However, financial conversations are an important part of a successful marriage.

If you learn your spouse has late payments due on debt like federal student loans, back taxes, spousal support or child support, and the refund from your joint return goes toward their debts, you can apply for injured spouse relief. This may allow you to receive some of the refund rather than it all going to the overdue obligations of your spouse.

Then, consider coming up with a plan together or working with a financial adviser to help you both manage debt in a way that puts you on a path toward financial bliss.