Generally, if a couple files a joint tax return, either or both of the spouses can be held responsible for any tax shortfall. Although an “innocent spouse” may be absolved of their tax responsibilities, a new case, Sample TC Memo 2025-118, 11/17/25, shows that this special tax protection may be forfeited if the spouse later becomes aware of improprieties.
Background: When you file a joint tax return with your spouse, you are “jointly and severally” liable for the tax payments. This means that the IRS can pursue either one of you, or both for you, if you owe tax. This includes back taxes, penalties and interest.
But there’s a way out of the tax mess if you can qualify as an innocent spouse under the prevailing IRS rules. To qualify, you must meet the following requirements.
- You filed a joint return that has an understatement of tax due to erroneous items of your spouse (or former spouse).
- You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax.
- Considering all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.
- You and your spouse (or former spouse) have not transferred property to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse or business partner.
If a spouse does not qualify for innocent spouse relief under these conditions, they may still qualify for equitable relief. For these purposes, the determination is based on all the facts and circumstances.
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Facts of the new case: The taxpayer, a resident of Minnesota, was a high school graduate who ran her husband’s dental office and served as receptionist. She relied on her husband to handle all their financial affairs and tax obligations. They filed joint tax returns during the tax years in question.
Eventually, the couple legally separated, but there is nothing in the record to indicate that they ever stopped living together. Pursuant to the agreement, it appears that the wife walked away with a pretty sweet deal: their main home in Minnesota, a vacation home in Montana, all of the husband’s 401(k) plan at the dental practice and one of their two cars.
The IRS assessed deficiencies for several tax years. For the tax years spanning 2011 through 2013, the IRS granted “innocent spouse” relief to the wife because she was unaware of their tax underpayments. But then she became apprised of visits from IRS agents and liabilities relating to subsequent years. Nevertheless, the wife continued to request to be treated as an innocent spouse.
Because she knew of the tax delinquencies—or should have known—the Tax Court denied relief for the 2014, 2017 and 2018 tax years.
Word of caution: This special tax relief isn’t automatic or permanent. Obtain all the relevant facts from clients to make a fully informed determination of their status.
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Tags: Income Taxes, innocent spouse, IRS, joint taxes, ken berry, marriage tax, mfj, tax court, tax law
