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Income Tax Return

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Income Tax Return

Income tax return Publication 970 - Additional Material Table of Contents AppendicesAppendix A. Income tax return Illustrated Example of Education Credits Glossary Appendices The following appendices are provided to help you claim the education benefits that will give you the lowest tax. Income tax return Appendix A—An illustrated example of education credits, including a filled-in Form 8863 showing how to claim both the American opportunity credit and lifetime learning credit for 2013. Income tax return Appendix B—A chart summarizing some of the major differences between the education tax benefits discussed in this publication. Income tax return It is intended only as a guide. Income tax return Look in this publication for more complete information. Income tax return   Appendix A. Income tax return Illustrated Example of Education Credits Dave and Valerie Jones are married and on their 2013 joint tax return they claim exemptions for their two dependent children, Sean (age 21, social security number: 000-00-0001) and Carey (age 18, social security number: 000–00–0002). Income tax return Their modified adjusted gross income (MAGI) on Form 1040, line 38 is $110,000. Income tax return Because Dave and Valerie have unusually high itemized deductions, their taxable income is $10,000 and their tax before credits is $1,000. Income tax return Sean enrolled as a full-time graduate student in August 2013 at California State College. Income tax return He graduated with his bachelor's degree in 2012 and did not attend school from January 2013 through July 2013. Income tax return His parents claimed the Hope Scholarship Credit for Sean for 2008 and the American opportunity credit for Sean for 2010, 2011, and 2012. Income tax return Carey enrolled full time as a freshman at the same college in January 2013 to begin working on her bachelor's degree. Income tax return In 2013, Dave and Valerie paid $7,000 in tuition for Sean and $8,500 in tuition for Carey. Income tax return California State College issued two Forms 1098-T, one for Sean and one for Carey, and sent them to the Joneses' residence. Income tax return California State College reports amounts billed in 2013 instead of amounts paid during 2013. Income tax return In completing Form 8863, the Joneses use the amounts they paid. Income tax return Neither Sean nor Carey has been convicted of a felony for possession or distribution of a controlled substance before the end of 2013. Income tax return Dave and Valerie figure their education credits by completing Form 8863. Income tax return They begin Form 8863 on page 2 before completing Part I on page 1. Income tax return Because the Joneses have two eligible students, they will complete page 2 twice, once for their son, Sean, and once for their daughter, Carey. Income tax return The Joneses decide to complete Part III for Carey first, as shown later. Income tax return They carry over the amount of $2,500 entered on Part III, line 30, to Part I, line 1. Income tax return The Joneses complete a separate Part III for their son Sean. Income tax return They check the “Yes” box on line 23, determine that Sean is not eligible for the American opportunity credit, and go to line 31 as instructed. Income tax return They figure their line 31 adjusted qualified education expenses for Sean to be $7,000. Income tax return Once they have completed Part III for each student, they figure their credits. Income tax return The Joneses figure their refundable American opportunity credit of $1,000 by completing Form 8863, Part I, lines 1 through 8. Income tax return They enter the amount from line 8, $1,000, on line 66 of their Form 1040. Income tax return The Joneses enter $7,000 on Part II, line 10, of Form 8863 and figure their tentative lifetime learning credit for 2013 to be $1,400 (line 12). Income tax return They cannot claim the full amount because their MAGI of $110,000 is greater than $107,000. Income tax return They enter the reduced amount of $1,190 (figured on Part II, line 18) on the Credit Limit Worksheet, line 1. Income tax return The $1,190 is added to their nonrefundable American opportunity credit ($1,500 on line 2 of the Credit Limit Worksheet) for a total nonrefundable credit of $2,690. Income tax return The Joneses enter $1,000 on line 7 of the Credit Limit Worksheet, which is the smaller of their tax from line 46 of their Form 1040 (which is $1,000) or the $2,690 on line 3 of the Credit Limit Worksheet. Income tax return They enter $1,000 on line 19, Part II of Form 8863 and on line 49 of Form 1040. Income tax return This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return Form 1098-T Adjusted Qualified Education Expenses Worksheet (Form 8863 instructions) 1. Income tax return Total qualified education expenses paid for or on behalf of the student in 2013 for the academic period 8,500 2. Income tax return Less adjustments:     a. Income tax return Tax-free educational assistance received in 2013 allocable to the academic period   0     b. Income tax return Tax-free educational assistance received in 2014 (and before you file your 2013 tax return) allocable to the academic period   0     c. Income tax return Refunds of qualified education expenses paid in 2013 if the refund is received in 2013 or in 2014 before you file your 2013 tax return   0   3. Income tax return Total adjustments (add lines 2a, 2b, and 2c) 0 4. Income tax return Adjusted qualified education expenses. Income tax return Subtract line 3 from line 1. Income tax return If zero or less, enter -0- 8,500 This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return Form 1098-T Adjusted Qualified Education Expenses Worksheet (Form 8863 instructions) 1. Income tax return Total qualified education expenses paid for or on behalf of the student in 2013 for the academic period 7,000 2. Income tax return Less adjustments:     a. Income tax return Tax-free educational assistance received in 2013 allocable to the academic period   0     b. Income tax return Tax-free educational assistance received in 2014 (and before you file your 2013 tax return) allocable to the academic period   0     c. Income tax return Refunds of qualified education expenses paid in 2013 if the refund is received in 2013 or in 2014 before you file your 2013 tax return   0   3. Income tax return Total adjustments (add lines 2a, 2b, and 2c) 0 4. Income tax return Adjusted qualified education expenses. Income tax return Subtract line 3 from line 1. Income tax return If zero or less, enter -0- 7,000 Credit Limit Worksheet (Form 8863 instructions) Nonrefundable Credit Worksheet 1. Income tax return Enter the amount from Form 8863, line 18 1. Income tax return 1,190 2. Income tax return Enter the amount from Form 8863, line 9 2. Income tax return 1,500 3. Income tax return Add lines 1 and 2 3. Income tax return 2,690 4. Income tax return Enter the amount from: Form 1040, line 46; or Form 1040A, line 28 4. Income tax return 1,000 5. Income tax return Enter the amount from either: Form 1040, lines 47 and 48, and the amount from Schedule R included on Form 1040, line 53; or Form 1040A, lines 29 and 30 5. Income tax return 0 6. Income tax return Subtract line 5 from line 4 6. Income tax return 1,000 7. Income tax return   Enter the smaller of line 3 or line 6 here and on Form 8863, line 19 7. Income tax return 1,000 This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return Form 8863 for Dave and Valerie Jones This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return Carey Jones page 2 This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return Filled-in Form 8863 Jones page 2 Appendix B. Income tax return Highlights of Education Tax Benefits for Tax Year 2013 This chart highlights some differences among the benefits discussed in this publication. Income tax return See the text for definitions and details. Income tax return Do not rely on this chart alone. Income tax return    Caution:You generally cannot claim more than one benefit for the same education expense. Income tax return   Scholarships,  Fellowships, Grants, and  Tuition  Reductions American Opportunity Credit Lifetime Learning Credit Student Loan Interest Deduction Tuition and Fees Deduction Coverdell ESA† Qualified Tuition Program (QTP)† Education Exception to Additional Tax on Early IRA Distributions† Education Savings Bond Program† Employer- Provided Educational Assistance† Business Deduction for Work-Related Education What is your  benefit? Amounts received may not be taxable   Credits can reduce the amount of tax you have to pay. Income tax return    40% of the credit may be refundable (limited to $1,000 per student). Income tax return Credits can reduce amount of tax you must pay Can deduct interest paid Can deduct expenses Earnings not  taxed Earnings not taxed No 10%  additional tax on early distribution Interest not taxed Employer benefits not taxed Can deduct expenses What is the annual limit? None $2,500 credit per student $2,000 credit per tax return     $2,500 deduction $4,000 deduction $2,000 contribution per beneficiary None Amount of qualified  education expenses Amount of qualified  education expenses $5,250 exclusion Amount of qualifying work-related education expenses What expenses  qualify besides  tuition and required enrollment fees? Course-related expenses such as fees, books, supplies, and equipment Course-related books, supplies, and equipment Amounts paid for required books, etc. Income tax return , that must be paid to the educational institution, etc. Income tax return , are required fees Books Supplies Equipment  Room & board  Transportation  Other necessary expenses  None Books Supplies Equipment  Expenses for special needs services  Payments to QTP  Higher education: Room & board if  at least half-time  student  Elem/sec (K–12) education: Tutoring Room & board Uniforms Transportation Computer  access Supplementary expenses Books Supplies Equipment  Room & board if  at least half-time student  Expenses for special needs services Books Supplies Equipment  Room & board if  at least half-time student  Expenses for special needs services Payments to Coverdell ESA  Payments to QTP Books Supplies Equipment Transportation  Travel  Other necessary expenses   Scholarships,  Fellowships, Grants, and  Tuition  Reductions American Opportunity Credit Lifetime Learning Credit Student Loan Interest Deduction Tuition and Fees Deduction Coverdell ESA† Qualified Tuition Program (QTP)† Education Exception to Additional Tax on Early IRA Distributions† Education Savings Bond Program† Employer- Provided Educational Assistance† Business Deduction for Work-Related Education What education qualifies? Undergraduate & graduate  K–12 Undergraduate & graduate Undergraduate & graduate  Courses to acquire or improve job skills    Undergraduate & graduate Undergraduate & graduate Undergraduate & graduate  K–12 Undergraduate & graduate Undergraduate & graduate Undergraduate & graduate Undergraduate & graduate Required by employer or law to keep present job, salary, status  Maintain or improve job skills What are some of the other  conditions that  apply? Must be in degree or vocational program  Payment of tuition and required fees must be allowed under the grant Can be claimed for only 4 tax years (which includes years Hope Scholarship Credit claimed)  Must be enrolled at least half-time in degree program  No felony drug conviction(s)  Must not have completed first 4 years of postsecondary education before end of preceding tax year. Income tax return   No other conditions Must have been at least half-time  student in degree program Cannot claim both deduction & education credit for same student in same year Assets must be distributed at age 30 unless special  needs beneficiary No other conditions No other conditions Applies only to qualified series  EE bonds issued after 1989 or series I bonds No other conditions Cannot be to  meet minimum educational requirements of present trade/business  Cannot qualify  you for new trade/business   In what income  range do benefits  phase out? No phaseout $80,000 – $90,000  $160,000 – $180,000 for joint returns $53,000 – $63,000  $107,000 – $127,000 for joint returns $60,000 – $75,000  $125,000 –  $155,000 for  joint returns  $60,000 – $80,000  $130,000 –  $160,000 for  joint returns  $95,000 – $110,000  $190,000 – $220,000 for  joint returns No phaseout No phaseout   No phaseout No phaseout † Any nontaxable distribution is limited to the amount that does not exceed qualified education expenses. Income tax return Glossary The education benefits included in this publication were enacted over many years, leading to a number of common terms being defined differently from one benefit to the next. Income tax return For example, an eligible educational institution means one thing when determining if earnings from a Coverdell education savings account are not taxable and something else when determining if a scholarship or fellowship is not taxable. Income tax return For each term listed below that has more than one definition, the definition for each education benefit is listed. Income tax return Academic period:   A semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Income tax return If an educational institution uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Income tax return Adjusted qualified education expenses (AQEE):    Qualified education expenses (defined later) reduced by any tax-free educational assistance, such as a tax-free scholarship or employer-provided educational assistance. Income tax return They must also be reduced by any qualified education expenses deducted elsewhere on your return, used to determine an education credit or other benefit, or used to determine a tax-free distribution. Income tax return For information on a specific benefit, see the appropriate chapter in this publication. Income tax return Candidate for a degree:   A student who meets either of the following requirements. Income tax return Attends a primary or secondary school or pursues a degree at a college or university, or Attends an accredited educational institution that is authorized to provide: A program that is acceptable for full credit toward a bachelor's or higher degree, or A program of training to prepare students for gainful employment in a recognized occupation. Income tax return Designated beneficiary:   The individual named in the document creating the account/plan who is to receive the benefit of the funds in the account/plan. Income tax return Eligible educational institution:    American opportunity credit. Income tax return Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Income tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Income tax return Coverdell education savings account (ESA). Income tax return Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Income tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Income tax return Also included is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. Income tax return Education savings bond program. Income tax return Same as American opportunity credit in this category. Income tax return IRA, early distributions from. Income tax return Same as American opportunity credit in this category. Income tax return Lifetime learning credit. Income tax return Same as American opportunity credit in this category. Income tax return Qualified tuition program (QTP). Income tax return Same as American opportunity credit in this category. Income tax return Scholarships and fellowships. Income tax return An institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. Income tax return Student loan, cancellation of. Income tax return Same as Scholarships and fellowships in this category. Income tax return Student loan interest deduction. Income tax return Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Income tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Income tax return Also included is an institution that conducts an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. Income tax return Tuition and fees deduction. Income tax return Same as American opportunity credit in this category. Income tax return Eligible student:    American opportunity credit. Income tax return A student who meets all of the following requirements for the tax year for which the credit is being determined. Income tax return Did not have expenses that were used to figure an American opportunity or Hope Scholarship Credit in any 4 earlier tax years. Income tax return Had not completed the first 4 years of postsecondary education (generally the freshman through senior years). Income tax return For at least one academic period beginning in the tax year, was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. Income tax return Was free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year. Income tax return Lifetime learning credit. Income tax return A student who is enrolled in one or more courses at an eligible educational institution. Income tax return Student loan interest deduction. Income tax return A student who was enrolled at least half-time in a program leading to a postsecondary degree, certificate, or other recognized educational credential at an eligible educational institution. Income tax return Tuition and fees deduction. Income tax return A student who is enrolled in one or more courses at an eligible educational institution. Income tax return Half-time student:   A student who is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Income tax return Modified adjusted gross income (MAGI):    American opportunity credit. Income tax return Adjusted gross income (AGI) as figured on the federal income tax return, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Income tax return Coverdell education savings account (ESA). Income tax return Same as American opportunity credit in this category. Income tax return Education savings bond program. Income tax return Adjusted gross income (AGI) as figured on the federal income tax return without taking into account any savings bond interest exclusion and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, Exclusion of income by bona fide residents of Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for student loan interest, Deduction for tuition and fees, and Deduction for domestic production activities. Income tax return Lifetime learning credit. Income tax return Same as American opportunity credit in this category. Income tax return Student loan interest deduction. Income tax return Adjusted gross income (AGI) as figured on the federal income tax return without taking into account any student loan interest deduction, tuition and fees deduction, or domestic production activities deduction, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Income tax return Tuition and fees deduction. Income tax return Adjusted gross income (AGI) as figured on the federal income tax return without taking into account any tuition and fees deduction, or domestic production activities deduction, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Income tax return Phaseout:   The amount of credit or deduction allowed is reduced when modified adjusted gross income (MAGI) is greater than a specified amount of income. Income tax return Qualified education expenses:   See pertinent chapter for specific items. Income tax return    American opportunity credit. Income tax return Tuition and certain related expenses (including student activity fees) required for enrollment or attendance at an eligible educational institution. Income tax return Books, supplies, and equipment needed for a course of study are included even if not purchased from the educational institution. Income tax return Does not include expenses for room and board. Income tax return Does not include expenses for courses involving sports, games, or hobbies (including noncredit courses) that are not part of the student's postsecondary degree program. Income tax return Coverdell education savings account (ESA). Income tax return Expenses related to or required for enrollment or attendance of the designated beneficiary at an eligible elementary, secondary, or postsecondary school. Income tax return Many specialized expenses included for K–12. Income tax return Also includes expenses for special needs services and contribution to qualified tuition program (QTP). Income tax return Education savings bond program. Income tax return Tuition and fees required to enroll at or attend an eligible educational institution. Income tax return Also includes contributions to a qualified tuition program (QTP) or Coverdell education savings account (ESA). Income tax return Does not include expenses for room and board. Income tax return Does not include expenses for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Income tax return IRA, early distributions from. Income tax return Tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution, plus certain limited costs of room and board for students who are enrolled at least half-time. Income tax return Also includes expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. Income tax return Lifetime learning credit. Income tax return Tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Income tax return Student-activity fees and expenses for course-related books, supplies, and equipment are included only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Income tax return Does not include expenses for room and board. Income tax return Does not include expenses for courses involving sports, games, or hobbies (including noncredit courses) that are not part of the student's postsecondary degree program, unless taken by the student to acquire or improve job skills. Income tax return Qualified tuition program (QTP). Income tax return Tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution, plus certain limited costs of room and board for students who are enrolled at least half-time. Income tax return Includes expenses for special needs services and computer access. Income tax return Scholarships and fellowships. Income tax return Expenses for tuition and fees required to enroll at or attend an eligible educational institution, and course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. Income tax return Course-related items must be required of all students in the course of instruction. Income tax return Student loan interest deduction. Income tax return Total costs of attending an eligible educational institution, including graduate school (however, limitations may apply to the cost of room and board allowed). Income tax return Tuition and fees deduction. Income tax return Tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Income tax return Student-activity fees and expenses for course-related books, supplies, and equipment are included only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Income tax return Recapture:   To include as income on your current year's return an amount allowed as a deduction in a prior year. Income tax return To include as tax on your current year's return an amount allowed as a credit in a prior year. Income tax return Rollover:   A tax-free distribution to you of cash or other assets from a tax-favored plan that you contribute to another tax-favored plan. Income tax return Transfer:   A movement of funds in a tax-favored plan from one trustee directly to another, either at your request or at the trustee's request. Income tax return Prev  Up  Next   Home   More Online Publications
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The Income Tax Return

Income tax return Publication 971 - Main Content Table of Contents How To Request ReliefException for agreements relating to TEFRA partnership proceedings. Income tax return The IRS Must Contact Your Spouse or Former Spouse Tax Court Review of Request Community Property LawsRelief for Married Persons Who Did Not File Joint Returns Innocent Spouse ReliefUnderstated Tax Erroneous Items Actual Knowledge or Reason To Know Indications of Unfairness for Innocent Spouse Relief Separation of Liability ReliefLimitations on Relief Equitable ReliefConditions for Getting Equitable Relief Factors for Determining Whether To Grant Equitable Relief RefundsProof Required Refunds Under Equitable Relief Limit on Amount of Refund Filled-in Form 8857 Flowcharts How To Request Relief File Form 8857 to ask the IRS for the types of relief discussed in this publication. Income tax return If you are requesting relief for more than three tax years, you must file an additional Form 8857. Income tax return The IRS will review your Form 8857 and let you know if you qualify. Income tax return A completed Form 8857 is shown later. Income tax return When to file Form 8857. Income tax return   You should file Form 8857 as soon as you become aware of a tax liability for which you believe only your spouse or former spouse should be held responsible. Income tax return The following are some of the ways you may become aware of such a liability. Income tax return The IRS is examining your tax return and proposing to increase your tax liability. Income tax return The IRS sends you a notice. Income tax return   You must file Form 8857 no later than two years after the date on which the IRS first attempted to collect the tax from you that occurs after July 22, 1998. Income tax return (But see the exceptions below for different filing deadlines that apply. Income tax return ) For this reason, do not delay filing because you do not have all the documentation. Income tax return   Collection activities that may start the 2-year period are: The IRS offset your income tax refund against an amount you owed on a joint return for another year and the IRS informed you about your right to file Form 8857. Income tax return The filing of a claim by the IRS in a court proceeding in which you were a party or the filing of a claim in a proceeding that involves your property. Income tax return This includes the filing of a proof of claim in a bankruptcy proceeding. Income tax return The filing of a suit by the United States against you to collect the joint liability. Income tax return The issuance of a section 6330 notice, which notifies you of the IRS' intent to levy and your right to a collection due process (CDP) hearing. Income tax return The collection-related notices include, but are not limited to, Letter 11 and Letter 1058. Income tax return Exception for equitable relief. Income tax return   On July 25, 2011, the IRS issued Notice 2011-70 (available at www. Income tax return irs. Income tax return gov/irb/2011-32_IRB/ar11. Income tax return html) expanding the amount of time to request equitable relief. Income tax return The amount of time to request equitable relief depends on whether you are seeking relief from a balance due, seeking a credit or refund, or both: Balance Due – Generally, you must file your request within the time period the IRS has to collect the tax. Income tax return Generally, the IRS has 10 years from the date the tax liability was assessed to collect the tax. Income tax return In certain cases, the 10-year period is suspended. Income tax return The amount of time the suspension is in effect will extend the time the IRS has to collect the tax. Income tax return See Pub. Income tax return 594, The IRS Collection Process, for details. Income tax return Credit or Refund – Generally, you must file your request within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. Income tax return But you may have more time to file if you live in a federally declared disaster area or you are physically or mentally unable to manage your financial affairs. Income tax return See Pub. Income tax return 556, Examination of Returns, Appeal Rights, and Claims for Refund, for details. Income tax return Both a Balance Due and a Credit or Refund – If you are seeking a refund of amounts you paid and relief from a balance due over and above what you have paid, the time period for credit or refund will apply to any payments you have made, and the time period for collection of a balance due amount will apply to any unpaid liability. Income tax return Exception for relief based on community property laws. Income tax return   If you are requesting relief based on community property laws, a different filing deadline applies. Income tax return See Relief from liability arising from community property law discussed later under Community Property Laws . Income tax return Form 8857 filed by or on behalf of a decedent. Income tax return   An executor (including any other duly appointed representative) may pursue a Form 8857 filed during the decedent's lifetime. Income tax return An executor (including any other duly appointed representative) may also file Form 8857 as long as the decedent satisfied the eligibility requirements while alive. Income tax return For purposes of separation of liability relief (discussed later), the decedent's marital status is determined on the earlier of the date relief was requested or the date of death. Income tax return Situations in which you are not entitled to relief. Income tax return   You are not entitled to innocent spouse relief for any tax year to which the following situations apply. Income tax return In a final decision dated after July 22, 1998, a court considered whether to grant you relief from joint liability and decided not to do so. Income tax return In a final decision dated after July 22, 1998, a court did not consider whether to grant you relief from joint liability, but you meaningfully participated in the proceeding and could have asked for relief. Income tax return You entered into an offer in compromise with the IRS. Income tax return You entered into a closing agreement with the IRS that disposed of the same liability for which you want to seek relief. Income tax return Exception for agreements relating to TEFRA partnership proceedings. Income tax return   You may be entitled to relief, discussed in (4) earlier, if you entered into a closing agreement for both partnership items and nonpartnership items, while you were a party to a pending TEFRA partnership proceeding. Income tax return (TEFRA is an acronym that refers to the “Tax Equity and Fiscal Responsibility Act of 1982” that prescribed the tax treatment of partnership items. Income tax return ) You are not entitled to relief for the nonpartnership items, but you will be entitled to relief for the partnership items (if you otherwise qualify). Income tax return Transferee liability not affected by innocent spouse relief provisions. Income tax return   The innocent spouse relief provisions do not affect tax liabilities that arise under federal or state transferee liability or property laws. Income tax return Therefore, even if you are relieved of the tax liability under the innocent spouse relief provisions, you may remain liable for the unpaid tax, interest, and penalties to the extent provided by these laws. Income tax return Example. Income tax return Herb and Wanda timely filed their 2008 joint income tax return on April 15, 2009. Income tax return Herb died in March 2010, and the executor of Herb's will transferred all of the estate's assets to Wanda. Income tax return In August 2010, the IRS assessed a deficiency for the 2008 return. Income tax return The items causing the deficiency belong to Herb. Income tax return Wanda is relieved of the deficiency under the innocent spouse relief provisions, and Herb's estate remains solely liable for it. Income tax return However, the IRS may collect the deficiency from Wanda to the extent permitted under federal or state transferee liability or property laws. Income tax return The IRS Must Contact Your Spouse or Former Spouse By law, the IRS must contact your spouse or former spouse. Income tax return There are no exceptions, even for victims of spousal abuse or domestic violence. Income tax return We will inform your spouse or former spouse that you filed Form 8857 and will allow him or her to participate in the process. Income tax return If you are requesting relief from joint and several liability on a joint return, the IRS must also inform him or her of its preliminary and final determinations regarding your request for relief. Income tax return However, to protect your privacy, the IRS will not disclose your personal information (for example, your current name, address, phone number(s), information about your employer, your income or assets) or any other information that does not relate to making a determination about your request for relief from liability. Income tax return If you petition the Tax Court (explained below), your spouse or former spouse may see your personal information. Income tax return Tax Court Review of Request After you file Form 8857, you may be able to petition (ask) the United States Tax Court to review your request for relief in the following two situations. Income tax return The IRS sends you a final determination letter regarding your request for relief. Income tax return You do not receive a final determination letter from the IRS within six months from the date you filed Form 8857. Income tax return If you seek equitable relief for an underpaid tax, you will be able to get a Tax Court review of your request only if the tax arose or remained unpaid on or after December 20, 2006. Income tax return The United States Tax Court is an independent judicial body and is not part of the IRS. Income tax return You must file a petition with the United States Tax Court in order for it to review your request for relief. Income tax return You must file the petition no later than the 90th day after the date the IRS mails its final determination notice to you. Income tax return If you do not file a petition, or you file it late, the Tax Court cannot review your request for relief. Income tax return You can get a copy of the rules for filing a petition by writing to the Tax Court at the following address:    United States Tax Court 400 Second Street, NW Washington, DC 20217 Or you can visit the Tax Court's website at www. Income tax return ustaxcourt. Income tax return gov Community Property Laws You must generally follow community property laws when filing a tax return if you are married and live in a community property state. Income tax return Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Income tax return Generally, community property laws require you to allocate community income and expenses equally between both spouses. Income tax return However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. Income tax return Relief for Married Persons Who Did Not File Joint Returns Married persons who live in community property states, but who did not file joint returns, have two ways to get relief. Income tax return Relief From Liability Arising From Community Property Law You are not responsible for the tax relating to an item of community income if all the following conditions exist. Income tax return You did not file a joint return for the tax year. Income tax return You did not include the item of community income in gross income. Income tax return The item of community income you did not include is one of the following: Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee. Income tax return Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor. Income tax return Your spouse's (or former spouse's) distributive share of partnership income. Income tax return Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). Income tax return Use the appropriate community property law to determine what is separate property. Income tax return Any other income that belongs to your spouse (or former spouse) under community property law. Income tax return You establish that you did not know of, and had no reason to know of, that community income. Income tax return See  Actual Knowledge or Reason To Know , below. Income tax return Under all facts and circumstances, it would not be fair to include the item of community income in your gross income. Income tax return See Indications of unfairness for liability arising from community property law, later. Income tax return Actual knowledge or reason to know. Income tax return   You knew or had reason to know of an item of community income if: You actually knew of the item of community income, or A reasonable person in similar circumstances would have known of the item of community income. Income tax return Amount of community income unknown. Income tax return   If you are aware of the source of the item of community income or the income-producing activity, but are unaware of the specific amount, you are considered to know or have reason to know of the item of community income. Income tax return Not knowing the specific amount is not a basis for relief. Income tax return Reason to know. Income tax return   The IRS will consider all facts and circumstances in determining whether you had reason to know of an item of community income. Income tax return The facts and circumstances include: The nature of the item of community income and the amount of the item relative to other income items. Income tax return The financial situation of you and your spouse (or former spouse). Income tax return Your educational background and business experience. Income tax return Whether the item of community income represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). Income tax return Indications of unfairness for liability arising from community property law. Income tax return   The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax due to the item of community income. Income tax return   The following are examples of factors the IRS will consider. Income tax return Whether you received a benefit, either directly or indirectly, from the omitted item of community income (defined below). Income tax return Whether your spouse (or former spouse) deserted you. Income tax return Whether you and your spouse have been divorced or separated. Income tax return  For other factors see Factors for Determining Whether To Grant Equitable Relief later. Income tax return Benefit from omitted item of community income. Income tax return   A benefit includes normal support, but does not include de minimis (small) amounts. Income tax return Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers received several years after the filing of the return. Income tax return   For example, if you receive property, including life insurance proceeds, from your spouse (or former spouse) and the property is traceable to omitted items of community income attributable to your spouse (or former spouse), you are considered to have benefitted from those omitted items of community income. Income tax return Equitable Relief If you do not qualify for the relief described above and are now liable for an underpaid or understated tax you believe should be paid only by your spouse (or former spouse), you may request equitable relief (discussed later). Income tax return How and When To Request Relief You request relief by filing Form 8857, as discussed earlier. Income tax return Fill in Form 8857 according to the instructions. Income tax return For relief from liability arising from community property law, you must file Form 8857 no later than 6 months before the expiration of the period of limitations on assessment (including extensions) against your spouse for the tax year for which you are requesting relief. Income tax return However, if the IRS begins an examination of your return during that 6-month period, the latest time for requesting relief is 30 days after the date the IRS' initial contact letter to you. Income tax return The period of limitation on assessment is the amount of time, generally three years, that the IRS has from the date you filed the return to assess taxes that you owe. Income tax return Innocent Spouse Relief By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return. Income tax return Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse). Income tax return However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. Income tax return The IRS can collect these amounts from either you or your spouse (or former spouse). Income tax return You must meet all of the following conditions to qualify for innocent spouse relief. Income tax return You filed a joint return. Income tax return There is an understated tax on the return that is due to erroneous items (defined later) of your spouse (or former spouse). Income tax return You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed). Income tax return See Actual Knowledge or Reason To Know, later. Income tax return Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax. Income tax return See Indications of Unfairness for Innocent Spouse Relief , later. Income tax return Innocent spouse relief will not be granted if the IRS proves that you and your spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. Income tax return A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. Income tax return Understated Tax You have an understated tax if the IRS determined that your total tax should be more than the amount that was actually shown on your return. Income tax return Erroneous Items Erroneous items are either of the following. Income tax return Unreported income. Income tax return This is any gross income item received by your spouse (or former spouse) that is not reported. Income tax return Incorrect deduction, credit, or basis. Income tax return This is any improper deduction, credit, or property basis claimed by your spouse (or former spouse). Income tax return The following are examples of erroneous items. Income tax return The expense for which the deduction is taken was never paid or incurred. Income tax return For example, your spouse, a cash-basis taxpayer, deducted $10,000 of advertising expenses on Schedule C of your joint Form 1040, but never paid for any advertising. Income tax return The expense does not qualify as a deductible expense. Income tax return For example, your spouse claimed a business fee deduction of $10,000 that was for the payment of state fines. Income tax return Fines are not deductible. Income tax return No factual argument can be made to support the deductibility of the expense. Income tax return For example, your spouse claimed $4,000 for security costs related to a home office, which were actually veterinary and food costs for your family's two dogs. Income tax return Actual Knowledge or Reason To Know You knew or had reason to know of an understated tax if: You actually knew of the understated tax, or A reasonable person in similar circumstances would have known of the understated tax. Income tax return Actual knowledge. Income tax return   If you actually knew about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. Income tax return You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. Income tax return For information about the criteria for determining whether you actually knew about an erroneous item, see Actual Knowledge later under Separation of Liability Relief. Income tax return Reason to know. Income tax return   If you had reason to know about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. Income tax return You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. Income tax return   The IRS will consider all facts and circumstances in determining whether you had reason to know of an understated tax due to an erroneous item. Income tax return The facts and circumstances include: The nature of the erroneous item and the amount of the erroneous item relative to other items. Income tax return The financial situation of you and your spouse (or former spouse). Income tax return Your educational background and business experience. Income tax return The extent of your participation in the activity that resulted in the erroneous item. Income tax return Whether you failed to ask, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question. Income tax return Whether the erroneous item represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). Income tax return Partial relief when a portion of erroneous item is unknown. Income tax return   You may qualify for partial relief if, at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item. Income tax return You will be relieved of the understated tax due to that portion of the item if all other requirements are met for that portion. Income tax return Example. Income tax return At the time you signed your joint return, you knew that your spouse did not report $5,000 of gambling winnings. Income tax return The IRS examined your tax return several months after you filed it and determined that your spouse's unreported gambling winnings were actually $25,000. Income tax return You established that you did not know about, and had no reason to know about, the additional $20,000 because of the way your spouse handled gambling winnings. Income tax return The understated tax due to the $20,000 will qualify for innocent spouse relief if you meet the other requirements. Income tax return The understated tax due to the $5,000 of gambling winnings you knew about will not qualify for relief. Income tax return Indications of Unfairness for Innocent Spouse Relief The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax. Income tax return The following are examples of factors the IRS will consider. Income tax return Whether you received a significant benefit (defined below), either directly or indirectly, from the understated tax. Income tax return Whether your spouse (or former spouse) deserted you. Income tax return Whether you and your spouse have been divorced or separated. Income tax return Whether you received a benefit on the return from the understated tax. Income tax return For other factors, see Factors for Determining Whether To Grant Equitable Relief later under Equitable Relief. Income tax return Significant benefit. Income tax return   A significant benefit is any benefit in excess of normal support. Income tax return Normal support depends on your particular circumstances. Income tax return Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understated tax. Income tax return Example. Income tax return You receive money from your spouse that is beyond normal support. Income tax return The money can be traced to your spouse's lottery winnings that were not reported on your joint return. Income tax return You will be considered to have received a significant benefit from that income. Income tax return This is true even if your spouse gives you the money several years after he or she received it. Income tax return Separation of Liability Relief Under this type of relief, the understated tax (plus interest and penalties) on your joint return is allocated between you and your spouse (or former spouse). Income tax return The understated tax allocated to you is generally the amount you are responsible for. Income tax return This type of relief is available only for unpaid liabilities resulting from the understated tax. Income tax return Refunds are not allowed. Income tax return To request separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. Income tax return You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. Income tax return (Under this rule, you are no longer married if you are widowed. Income tax return ) You were not a member of the same household (explained below) as the spouse with whom you filed the joint return at any time during the 12-month per- iod ending on the date you file Form 8857. Income tax return Members of the same household. Income tax return   You and your spouse are not members of the same household if you are living apart and are estranged. Income tax return However, you and your spouse are considered members of the same household if any of the following conditions are met. Income tax return You and your spouse reside in the same dwelling. Income tax return You and your spouse reside in separate dwellings but are not estranged, and one of you is temporarily absent from the other's household as explained in (3) below. Income tax return Either spouse is temporarily absent from the household and it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. Income tax return Examples of temporary absences include absence due to imprisonment, illness, business, vacation, military service, or education. Income tax return Burden of proof. Income tax return   You must be able to prove that you meet all of the requirements for separation of liability relief (except actual knowledge) and that you did not transfer property to avoid tax (discussed later). Income tax return You must also establish the basis for allocating the erroneous items. Income tax return Limitations on Relief Even if you meet the requirements discussed previously, separation of liability relief will not be granted in the following situations. Income tax return The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. Income tax return A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. Income tax return The IRS proves that at the time you signed your joint return, you had actual knowledge (explained below) of any erroneous items giving rise to the deficiency that were allocable to your spouse (or former spouse). Income tax return For the definition of erroneous items, see Erroneous Items earlier under Innocent Spouse Relief. Income tax return Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. Income tax return See Transfers of Property To Avoid Tax , later. Income tax return Actual Knowledge The relief discussed here does not apply to any part of the understated tax due to your spouse's (or former spouse's) erroneous items of which you had actual knowledge. Income tax return You and your spouse (or former spouse) remain jointly and severally liable for this part of the understated tax. Income tax return If you had actual knowledge of only a portion of an erroneous item, the IRS will not grant relief for that portion of the item. Income tax return You had actual knowledge of an erroneous item if: You knew that an item of unreported income was received. Income tax return (This rule applies whether or not there was a receipt of cash. Income tax return ) You knew of the facts that made an incorrect deduction or credit unallowable. Income tax return For a false or inflated deduction, you knew that the expense was not incurred, or not incurred to the extent shown on the tax return. Income tax return Knowledge of the source of an erroneous item is not sufficient to establish actual knowledge. Income tax return Also, your actual knowledge may not be inferred when you merely had a reason to know of the erroneous item. Income tax return Similarly, the IRS does not have to establish that you knew of the source of an erroneous item in order to establish that you had actual knowledge of the item itself. Income tax return Your actual knowledge of the proper tax treatment of an erroneous item is not relevant for purposes of demonstrating that you had actual knowledge of that item. Income tax return Neither is your actual knowledge of how the erroneous item was treated on the tax return. Income tax return For example, if you knew that your spouse received dividend income, relief is not available for that income even if you did not know it was taxable. Income tax return Example. Income tax return Bill and Karen Green filed a joint return showing Karen's wages of $50,000 and Bill's self-employment income of $10,000. Income tax return The IRS audited their return and found that Bill did not report $20,000 of self-employment income. Income tax return The additional income resulted in a $6,000 understated tax, plus interest and penalties. Income tax return After obtaining a legal separation from Bill, Karen filed Form 8857 to request separation of liability relief. Income tax return The IRS proved that Karen actually knew about the $20,000 of additional income at the time she signed the joint return. Income tax return Bill is liable for all of the understated tax, interest, and penalties because all of it was due to his unreported income. Income tax return Karen is also liable for the understated tax, interest, and penalties due to the $20,000 of unreported income because she actually knew of the item. Income tax return The IRS can collect the entire $6,000 plus interest and penalties from either Karen or Bill because they are jointly and individually liable for it. Income tax return Factors supporting actual knowledge. Income tax return   The IRS may rely on all facts and circumstances in determining whether you actually knew of an erroneous item at the time you signed the return. Income tax return The following are examples of factors the IRS may use. Income tax return Whether you made a deliberate effort to avoid learning about the item in order to be shielded from liability. Income tax return Whether you and your spouse (or former spouse) jointly owned the property that resulted in the erroneous item. Income tax return Exception for spousal abuse or domestic violence. Income tax return   Even if you had actual knowledge, you may still qualify for relief if you establish that: You were the victim of spousal abuse or domestic violence before signing the return, and Because of that abuse, you did not challenge the treatment of any items on the return because you were afraid your spouse (or former spouse) would retaliate against you. Income tax return   If you establish that you signed your joint return under duress (threat of harm or other form of coercion), then it is not a joint return, and you are not liable for any tax shown on that return or any tax deficiency for that return. Income tax return However, you may be required to file a separate return for that tax year. Income tax return For more information about duress, see the instructions for Form 8857. Income tax return Transfers of Property To Avoid Tax If your spouse (or former spouse) transfers property (or the right to property) to you for the main purpose of avoiding tax or payment of tax, the tax liability allocated to you will be increased by the fair market value of the property on the date of the transfer. Income tax return The increase may not be more than the entire amount of the liability. Income tax return A transfer will be presumed to have as its main purpose the avoidance of tax or payment of tax if the transfer is made after the date that is 1 year before the date on which the IRS sent its first letter of proposed deficiency. Income tax return This presumption will not apply if: The transfer was made under a divorce decree, separate maintenance agreement, or a written instrument incident to such an agreement, or You establish that the transfer did not have as its main purpose the avoidance of tax or payment of tax. Income tax return If the presumption does not apply, but the IRS can establish that the purpose of the transfer was the avoidance of tax or payment of tax, the tax liability allocated to you will be increased as explained above. Income tax return Equitable Relief If you do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law, you may still be relieved of responsibility for tax, interest, and penalties through equitable relief. Income tax return Unlike innocent spouse relief or separation of liability relief, you can get equitable relief from an understated tax (defined earlier under Innocent Spouse Relief ) or an underpaid tax. Income tax return An underpaid tax is an amount of tax you properly reported on your return but you have not paid. Income tax return For example, your joint 2009 return shows that you and your spouse owed $5,000. Income tax return You paid $2,000 with the return. Income tax return You have an underpaid tax of $3,000. Income tax return Conditions for Getting Equitable Relief You may qualify for equitable relief if you meet all of the following conditions. Income tax return You are not eligible for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. Income tax return You have an understated tax or an underpaid tax. Income tax return You did not pay the tax. Income tax return However, see Refunds , later, for situations in which you are entitled to a refund of payments you made. Income tax return You establish that, taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated or underpaid tax. Income tax return See Factors for Determining Whether To Grant Equitable Relief, later. Income tax return You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. Income tax return A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. Income tax return Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. Income tax return See Transfers of Property To Avoid Tax, earlier, under Separation of Liability Relief. Income tax return You did not file or fail to file your return with the intent to commit fraud. Income tax return The income tax liability from which you seek relief must be attributable to an item of the spouse (or former spouse) with whom you filed the joint return, unless one of the following exceptions applies: The item is attributable or partially attributable to you solely due to the operation of community property law. Income tax return If you meet this exception, that item will be considered attributable to your spouse (or former spouse) for purposes of equitable relief. Income tax return If the item is titled in your name, the item is presumed to be attributable to you. Income tax return However, you can rebut this presumption based on the facts and circumstances. Income tax return You did not know, and had no reason to know, that funds intended for the payment of tax were misappropriated by your spouse (or former spouse) for his or her benefit. Income tax return If you meet this exception, the IRS will consider granting equitable relief although the underpaid tax may be attributable in part or in full to your item, and only to the extent the funds intended for payment were taken by your spouse (or former spouse). Income tax return You establish that you were the victim of spousal abuse or domestic violence before signing the return, and that, as a result of the prior abuse, you did not challenge the treatment of any items on the return for fear of your spouse's (or former spouse's) retaliation. Income tax return If you meet this exception, relief will be considered although the understated tax or underpaid tax may be attributable in part or in full to your item. Income tax return Factors for Determining Whether To Grant Equitable Relief The IRS will consider all of the facts and circumstances in order to determine whether it is unfair to hold you responsible for the understated or underpaid tax. Income tax return The following are examples of factors that the IRS will consider to determine whether to grant equitable relief. Income tax return The IRS will consider all factors and weigh them appropriately. Income tax return Relevant Factors The following are examples of factors that may be relevant to whether the IRS will grant equitable relief. Income tax return Whether you are separated (whether legally or not) or divorced from your spouse. Income tax return A temporary absence, such as an absence due to imprisonment, illness, business, vacation, military service, or education, is not considered separation for this purpose. Income tax return A temporary absence is one where it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. Income tax return Whether you would suffer a significant economic hardship if relief is not granted. Income tax return (In other words, you would not be able to pay your reasonable basic living expenses. Income tax return ) Whether you have a legal obligation under a divorce decree or agreement to pay the tax. Income tax return This factor will not weigh in favor of relief if you knew or had reason to know, when entering into the divorce decree or agreement, that your former spouse would not pay the income tax liability. Income tax return Whether you received a significant benefit (beyond normal support) from the underpaid tax or item causing the understated tax. Income tax return (For a definition of significant benefit, see Indications of Unfairness for Innocent Spouse Relief earlier. Income tax return ) Whether you have made a good faith effort to comply with federal income tax laws for the tax year for which you are requesting relief or the following years. Income tax return Whether you knew or had reason to know about the items causing the understated tax or that the tax would not be paid, as explained next. Income tax return Knowledge or reason to know. Income tax return   In the case of an underpaid tax, the IRS will consider whether you did not know and had no reason to know that your spouse (or former spouse) would not pay the income tax liability. Income tax return   In the case of an income tax liability that arose from an understated tax, the IRS will consider whether you did not know and had no reason to know of the item causing the understated tax. Income tax return Reason to know of the item giving rise to the understated tax will not be weighed more heavily than other factors. Income tax return Actual knowledge of the item giving rise to the understated tax, however, is a strong factor weighing against relief. Income tax return This strong factor may be overcome if the factors in favor of equitable relief are particularly compelling. Income tax return Reason to know. Income tax return   In determining whether you had reason to know, the IRS will consider your level of education, any deceit or evasiveness of your spouse (or former spouse), your degree of involvement in the activity generating the income tax liability, your involvement in business and household financial matters, your business or financial expertise, and any lavish or unusual expenditures compared with past spending levels. Income tax return Example. Income tax return You and your spouse filed a joint 2009 return. Income tax return That return showed you owed $10,000. Income tax return You had $5,000 of your own money and you took out a loan to pay the other $5,000. Income tax return You gave 2 checks for $5,000 each to your spouse to pay the $10,000 liability. Income tax return Without telling you, your spouse took the $5,000 loan and spent it on himself. Income tax return You and your spouse were divorced in 2010. Income tax return In addition, you had no knowledge or reason to know at the time you signed the return that the tax would not be paid. Income tax return These facts indicate to the IRS that it may be unfair to hold you liable for the $5,000 underpaid tax. Income tax return The IRS will consider these facts, together with all of the other facts and circumstances, to determine whether to grant you equitable relief from the $5,000 underpaid tax. Income tax return Factors Weighing in Favor of Equitable Relief The following are examples of factors that will weigh in favor of equitable relief, but will not weigh against equitable relief. Income tax return Whether your spouse (or former spouse) abused you. Income tax return Whether you were in poor mental or physical health on the date you signed the return or at the time you requested relief. Income tax return Refunds If you are granted relief, refunds are: Permitted under innocent spouse relief as explained later under Limit on Amount of Refund . Income tax return Not permitted under separation of liability relief. Income tax return Permitted in limited circumstances under equitable relief, as explained under Refunds Under Equitable Relief. Income tax return Proof Required The IRS will only refund payments you made with your own money. Income tax return However, you must provide proof that you made the payments with your own money. Income tax return Examples of proof are a copy of your bank statement or a canceled check. Income tax return No proof is required if your individual refund was used by the IRS to pay a tax you owed on a joint tax return for another year. Income tax return Refunds Under Equitable Relief In the following situations, you are eligible to receive a refund of certain payments you made. Income tax return Underpaid tax. Income tax return   If you are granted relief for an underpaid tax, you are eligible for a refund of separate payments that you made after July 22, 1998. Income tax return However, you are not eligible for refunds of payments made with the joint return, joint payments, or payments that your spouse (or former spouse) made. Income tax return For example, withholding tax and estimated tax payments cannot be refunded because they are considered made with the joint return. Income tax return   The amount of the refund is subject to the limit discussed later under Limit on Amount of Refund. Income tax return Understated tax. Income tax return   If you are granted relief for an understated tax, you are eligible for a refund of certain payments made under an installment agreement that you entered into with the IRS, if you have not defaulted on the installment agreement. Income tax return You are not in default if the IRS did not issue you a notice of default or take any action to end the installment agreement. Income tax return Only installment payments made after the date you filed Form 8857 are eligible for a refund. Income tax return   The amount of the refund is subject to the limit discussed next. Income tax return Limit on Amount of Refund The amount of your refund is limited. Income tax return Read the following chart to find out the limit. Income tax return IF you file Form 8857. Income tax return . Income tax return . Income tax return THEN the refund cannot be more than. Income tax return . Income tax return . Income tax return Within 3 years after filing your return The part of the tax paid within 3 years (plus any extension of time for filing your return) before you filed Form 8857. Income tax return After the 3-year period, but within 2 years from the time you paid the tax The tax you paid within 2 years immediately before you filed Form 8857. Income tax return Filled-in Form 8857 This part explains how Janie Boulder fills out Form 8857 to request innocent spouse relief. Income tax return Janie and Joe Boulder filed a joint tax return for 2007. Income tax return They claimed one dependency exemption for their son Michael. Income tax return Their return was adjusted by the IRS because Joe did not report a $5,000 award he won that year. Income tax return Janie did not know about the award when the return was filed. Income tax return They agreed to the adjustment but could not pay the additional amount due of $815 ($650 tax + $165 penalty and interest). Income tax return Janie and Joe were divorced on May 13, 2009. Income tax return In February 2010, Janie filed her 2009 federal income tax return as head of household. Income tax return She expected a refund of $1,203. Income tax return In May 2010, she received a notice informing her that the IRS had offset her refund against the $815 owed on her joint 2007 income tax return and that she had a right to file Form 8857. Income tax return Janie applies the conditions listed earlier under Innocent Spouse Relief to see if she qualifies for relief. Income tax return Janie meets the first and second conditions because the joint tax return they filed has an understated tax due to Joe's erroneous item. Income tax return Janie believes she meets the third condition. Income tax return She did not know about the award and had no reason to know about it because of the secretive way Joe conducted his financial affairs. Income tax return Janie believes she meets the fourth condition. Income tax return She believes it would be unfair to be held liable for the tax because she did not benefit from the award. Income tax return Joe spent it on personal items for his use only. Income tax return Because Janie believes she qualifies for innocent spouse relief, she first completes Part I of Form 8857 to determine if she should file the form. Income tax return In Part I, she makes all entries under the Tax Year 1 column because she is requesting relief for only one year. Income tax return Part I Line 1. Income tax return   She enters “2007” on line 1 because this is the tax year for which she is requesting relief. Income tax return Line 2. Income tax return   She checks the box because she wants a refund. Income tax return Note. Income tax return Because the IRS used her individual refund to pay the tax owed on the joint tax return, she does not need to provide proof of payment. Income tax return Line 3. Income tax return   She checks the “No” box because the IRS did not use her share of a joint refund to pay Joe's past-due debts. Income tax return Line 4. Income tax return   She checks the “Yes” box because she filed a joint tax return for tax year 2007. Income tax return Line 5. Income tax return   She skips this line because she checked the “Yes” box on line 4. Income tax return Part II Line 6. Income tax return   She enters her name, address, social security number, county, and best daytime phone number. Income tax return Part III Line 7. Income tax return   She enters Joe's name, address, social security number, and best daytime phone number. Income tax return Line 8. Income tax return   She checks the “divorced since” box and enters the date she was divorced as “05/13/2009. Income tax return ” She attaches a copy of her entire divorce decree (not Illustrated) to the form. Income tax return Line 9. Income tax return   She checks the box for “High school diploma, equivalent, or less,” because she had completed high school when her 2007 joint tax return was filed. Income tax return Line 10. Income tax return   She checks the “No” box because she was not a victim of spousal abuse or domestic violence. Income tax return Line 11. Income tax return   She checks the “No” box because neither she nor Joe incurred any large expenses during the year for which she wants relief. Income tax return Line 12. Income tax return   She checks the “Yes” box because she signed the 2007 joint tax return. Income tax return Line 13. Income tax return   She checks the “No” box because she did not have a mental or physical condition when the return was filed and does not have one now. Income tax return Part IV Line 14. Income tax return   Because she was not involved in preparing the return, she checks the box, “You were not involved in preparing the returns. Income tax return ” Line 15. Income tax return   She checks the box, “You did not know anything was incorrect or missing” because she did not know that Joe had received a $5,000 award. Income tax return She explains this in the space provided. Income tax return Line 16. Income tax return   She checks the box, “You knew that person had income” because she knew Joe had income from wages. Income tax return She also lists Joe's income. Income tax return Under “Type of Income” she enters “wages. Income tax return ” Under “Who paid it to that person,” she enters the name of Joe's employer, “Allied. Income tax return ” Under “Tax Year 1” she enters the amount of Joe's wages, “$40,000. Income tax return ” Because she is only requesting relief for one tax year, she leaves the entry spaces for “Tax Year 2” and “Tax Year 3” blank. Income tax return Line 17. Income tax return   She checks the “No” box because she did not know any amount was owed to the IRS when the 2007 return was signed. Income tax return Line 18. Income tax return   She checks the “No” box because, when the return was signed, she was not having financial problems. Income tax return Line 19. Income tax return   She checks the box, “You were not involved in handling money for the household” because Joe handled all the money for the household. Income tax return She provides additional information in the space provided. Income tax return Line 20. Income tax return   She checks the “No” box because Joe has never transferred money or property to her. Income tax return Part V Line 21. Income tax return   She enters the number “1” on both the line for “Adults” and the line for “Children” because her current household consists of herself and her son. Income tax return Line 22. Income tax return   She enters her average monthly income for her entire household. Income tax return Line 23. Income tax return   She lists her assets, which are $500 for the fair market value of a car, $450 in her checking account, and $100 in her savings account. Income tax return Signing and mailing Form 8857. Income tax return    Janie signs and dates the form. Income tax return She attaches the copy of her divorce decree (not illustrated) required by line 8. Income tax return Finally, she sends the form to the IRS address or fax number shown in the instructions for Form 8857. Income tax return This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return Boulder's filled-in Form 8857 page 1 This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return Boulder's filled-in Form 8857 page 2 This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return Boulder's filled-in Form 8857 page 3 This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return Boulder's filled-in Form 8857 page 4 Flowcharts The following flowcharts provide a quick way for determining whether you may qualify for relief. Income tax return But do not rely on these flowcharts alone. Income tax return Also read the earlier discussions. Income tax return Figure A. Income tax return Do You Qualify for Innocent Spouse Relief? Please click here for the text description of the image. Income tax return "Do You Qualify for Innocent Spouse Relief?" Figure B. Income tax return Do You Qualify for Separation of Liability Relief? Please click here for the text description of the image. Income tax return "Do You Qualify for Separation of Liability Relief?" Figure C. Income tax return Do You Qualify for Equitable Relief? This image is too large to be displayed in the current screen. Income tax return Please click the link to view the image. Income tax return "Do You Qualify for Equitable Relief?" Prev  Up  Next   Home   More Online Publications