Tax CPA Accountant compares Form 8379, Injured Spouse Allocation and Form 8857, Request for Innocent Spouse Relief | IRS Publication 971, Innocent Spouse Relief

Tax CPA accountants hear folks confusing Form 8379, Injured Spouse Allocation, with Form 8857, Request for Innocent Spouse Relief and vice versa. Form 8857 is so complex that it merits IRS Publication 971, Innocent Spouse Relief, 24 pages of Form 8857 instructions and guidance.

Form 8857, Request for Innocent Spouse Relief and IRS Publication 971, Innocent Spouse Relief

Again, read the Form 8857 instructions.

With a joint Form 1040 tax return, both spouses are liable for the entire amount of taxes due. Most folks assume their liability is only 50%. Here’s a typical Form 8857 scenario:

• John and Mary always file a joint Form 1040 tax return.
• John prepares the taxes and Mary’s involvement is just her signature.
• John and Mary separate.
• The IRS starts hounding Mary for taxes on some type of income John didn’t report on their last two joint tax returns.
• If Mary files a timely Form 8857, the IRS may decide May isn’t responsible for any of the tax related to the understated income on the joint tax returns John prepared.

Here are a few earlier Form 8857 and Publication 971 posts:

• Streamlined IRS tax Form 8857 for 2013.
• Innocent Spouse Relief tax court case.

Here’s what to look for in a Form 8857 CPA:

• Your Form 8857 CPA should watch Innocent Spouse Relief tax court cases as they sometimes highlight “gray” areas of Form 8857 taxation.
• Your CPA should be empathetic; Form 8857 often involves spousal abuse.
• Confidentiality is crucial. Form 8857 requires explicit personal details.
• Your CPA should know there’s lots of Innocent Spouse relief information published by the IRS beyond the Form 8857 instructions and IRS Publication 971, Innocent Spouse Relief.

Form 8379, Injured Spouse Allocation, basics

“Here’s what some folks do instead of filing Form 8379 to reclaim part of a tax refund. The IRS only snatches refunds if there is a refund to snatch. So adjust your payroll tax and/or estimated tax payments such that you break even or owe some tax on the Form 1040. Remember the potential consequences.”
- Gary Bode, Form 8857 CPA

I always recommend that folks should look at the current year’s Form 8379 and the Form 8379 instructions. Lots of folks self-prepare Form 8379 every year and include it with their Married Filing Jointly status Form 1040. Here’s a common Injured Spouse scenario:

• John and Mary file Form 1040 using the Married Filing Jointly status.
• Mary is in default with her student loans.
• On some issues, like unpaid students loans, back child support and tax liens, the IRS itself becomes a collection agent. How? By snatching tax refunds.
• So Mary and John file a joint 2013 Form 1040 tax return generating an IRS refund.
• The IRS diverts all that refund to Mary’s student loan lender.
• But part of that refund was John’s. John files Form 8379, Injured Spouse Allocation, and the IRS, under some circumstances, issues John’s share of the refund to him.
• Mary’s portion of the refund still goes to the student loan lender.

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