You must generally follow community property laws when filing a tax return if you are married and live in a community property state. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Generally, community property laws require you to allocate community income and expenses equally between both spouses. 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.taxmap/pubs/p971-001.htm#TXMP49ee82cd
Married persons who live in community property states, but who did not file joint returns, have two ways to get relief.taxmap/pubs/p971-001.htm#TXMP27b4c066
You are not responsible for the tax relating to an item of community income if all the following conditions exist.
- You did not file a joint return for the tax year.
- You did not include the item of community income in gross income.
- 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 your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor.
- Your spouse's (or former spouse's) distributive share of partnership income.
- Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). Use the appropriate community property law to determine what is separate property.
- Any other income that belongs to your spouse (or former spouse) under community property law.
- You establish that you did not know of, and had no reason to know of, that community income. See Actual knowledge or reason to know, below.
- Under all facts and circumstances, it would not be fair to include the item of community income in your gross income. See Indications of unfairness for liability arising from community property law, later.
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.
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. Not knowing the specific amount is not a basis for relief.taxmap/pubs/p971-001.htm#TXMP2fd8c3dd
The IRS will consider all facts and circumstances in determining whether you had reason to know of an item of community income. The facts and circumstances include:
- The nature of the item of community income and the amount of the item relative to other income items.
- The financial situation of you and your spouse (or former spouse).
- Your educational background and business experience.
- 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).
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.
The following are examples of factors the IRS will consider.
- Whether you received a benefit, either directly or indirectly, from the omitted item of community income (defined below).
- Whether your spouse (or former spouse) deserted you.
- Whether you and your spouse have been divorced or separated.
For other factors see Factors for Determining Whether To Grant Equitable Relief
on page 8.
A benefit includes normal support, but does not include de minimis (small) amounts. 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.
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.taxmap/pubs/p971-001.htm#TXMP79ce1f56
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).taxmap/pubs/p971-001.htm#TXMP2cd733b3
You request relief by filing Form 8857, as discussed earlier. Fill in Form 8857 according to the instructions.
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. 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 examination begins. 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.