Section 6015(b) innocent spouse relief can’t be used for an underpayment, which occurs when the tax is admitted to be due on the return, but it is not paid at the time of filing.1 But, innocent spouse relief is appropriate for an understatement of tax, i.e., the offending spouse filed a return with incomplete or false information. Generally, if the other spouse did not know or have reason to know about the unreported income or erroneous items and did not receive benefits from the unreported income or erroneous items, that spouse may be eligible for innocent spouse relief. A single return may have a mixture of underpayment and understatement issues.
If the requesting spouse knew or had reason to know of the understatement, innocent spouse relief is not available.2 The reason-to-know standard considers all the facts and circumstances (e.g., the nature of the item, the requesting spouse’s education and business background, the extent of that spouse’s participation) and inquires whether a reasonable person in similar circumstances would have known of the understatement.3 The existence of domestic violence in the marriage can be an important factor; in these situations, an abuser often controls the household’s finances and an abused spouse may have been afraid to inquire about these matters.