If your tax refund was held -- or you were notified that it would be held -- for your spouse's debt, it's vital to take action to avoid further problems. The IRS has a method for protecting your hard-earned refund from your partner's obligations. It's called Injured Spouse Allocation, and here's a quick guide to how to use it.
What is It?
Injured Spouse Allocation is for situations in which only one of the spouses -- who both have income -- on a Married Filing Jointly return is obligated to pay a particular debt. This type of federal debt includes federal taxes (from prior to the relationship), student loans or child support. By using the IRS's form and instructions, you can separate your income, payments and credits from those of your joint-filing spouse. The IRS will then review these allocations and determine how much of any refund is due to you and how much should go to your partner's debts.
What It's Not
Injured Spouse Relief should not be confused with the similarly-named Innocent Spouse Relief. The former is filed with your return when only one spouse has a debt. The latter is designed to protect the refund of a spouse who signed a joint return but did not know -- and had no reason to know -- that the other spouse had understated income (and thereby understated the tax due). To request protection of your portion of the refund after discovering such an understatement, you may complete Form 8857 and send it to the IRS for review.
How Do You Request it?
You use Form 8379 to request Injured Spouse Allocation. This form helps you proportion the amounts of each partner's contribution to the tax return -- income, expenses, deductions, credits and payments. While income and payments may be easy to allocate between the parties, pro-rating the credits or deductions may not be so easy. For this portion of the form, you may need to work with a qualified tax preparer who has experience with Injured Spouse Allocation.
When choosing to use Injured Spouse Relief, be aware that it may increase the cost of tax preparation and that your return cannot be processed automatically at the IRS. Since the IRS will have to review the allocation personally and make a determination, it will take significantly longer to receive your refund. So begin the process early and consult with an experienced preparer if you have any uncertainty about how to fill out the form. While it may take some additional work, the ability to protect your refund and refundable credits is well worth the investment. Contact a company like HBE Becker Meyer Love LLP for more information.Share