The Innocent Spouse Rule (form 8857) is meant to be relief from any tax liability that you become aware of for which you believe only your spouse or former spouse should be held.
Previously, one had to act quickly about such concerns because there was a two year statute of limitations on such filings. But oftentimes the only way you may become aware of such a liability is by either the IRS examining your tax return and proposing to increase your tax liability, or the IRS sending you a notice.
The innocent spouse is a taxpayer who did not know or have reason to know that his or her spouse understated or underpaid the couple’s tax liability. Under the Innocent Spouse umbrella are three types of spousal relief – the innocent spouse provision, separations of liability, and the removal of the two-year limit (in some cases.)
In order to qualify, one must meet several qualifications, one of which being that you have to establish that at the time you signed a joint return, you had no reason to know that there was an understatement of tax.
Under the separation of liability, the IRS essentially allows the innocent spouse to pay the taxes he or she is responsible for and then pursue the other spouse (or former spouse) for their understatement of tax, including interest and penalties.
If one does not qualify under either of the first two provisions, you may try for equitable relief, which is kind of the safety net provision allowing the IRS to consider other factors.
The IRS receives about 50,000 innocent spouse requests annually. Approximately 2,000 of the requests filed under the equitable relief provision didn’t fall under the two-year period. The IRS did change that law though, so that equitable relief requests can no longer be denied based on the two-year limit.