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Publication 971
taxmap/pubs/p971-004.htm#en_us_publink100098643

Equitable Relief(p8)

rule
If you do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law, you may still be relieved of responsibility for tax, interest, and penalties through equitable relief.
Unlike innocent spouse relief or separation of liability relief, you can get equitable relief from an understated tax (defined earlier under Innocent Spouse Relief) or an underpaid tax. An underpaid tax is an amount of tax you properly reported on your return but you have not paid. For example, your joint 2009 return shows that you and your spouse owed $5,000. You paid $2,000 with the return. You have an underpaid tax of $3,000.
taxmap/pubs/p971-004.htm#en_us_publink100098644

Conditions for Getting Equitable Relief(p8)

rule
You may qualify for equitable relief if you meet all of the following conditions.
  1. You are not eligible for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law.
  2. You have an understated tax or an underpaid tax.
  3. You did not pay the tax. However, see Refunds, later, for situations in which you are entitled to a refund of payments you made.
  4. You establish that, taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated or underpaid tax. See Factors for Determining Whether To Grant Equitable Relief, later.
  5. You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner.
  6. Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. See Transfers of Property To Avoid Tax, earlier, under Separation of Liability Relief.
  7. You did not file or fail to file your return with the intent to commit fraud.
  8. The income tax liability from which you seek relief must be attributable to an item of the spouse (or former spouse) with whom you filed the joint return, unless one of the following exceptions applies:
    1. The item is attributable or partially attributable to you solely due to the operation of community property law. If you meet this exception, that item will be considered attributable to your spouse (or former spouse) for purposes of equitable relief.
    2. If the item is titled in your name, the item is presumed to be attributable to you. However, you can rebut this presumption based on the facts and circumstances.
    3. You did not know, and had no reason to know, that funds intended for the payment of tax were misappropriated by your spouse (or former spouse) for his or her benefit. If you meet this exception, the IRS will consider granting equitable relief although the underpaid tax may be attributable in part or in full to your item, and only to the extent the funds intended for payment were taken by your spouse (or former spouse).
    4. You establish that you were the victim of spousal abuse or domestic violence before signing the return, and that, as a result of the prior abuse, you did not challenge the treatment of any items on the return for fear of your spouse's (or former spouse's) retaliation. If you meet this exception, relief will be considered although the understated tax or underpaid tax may be attributable in part or in full to your item.
taxmap/pubs/p971-004.htm#en_us_publink100098645

Factors for Determining Whether To Grant Equitable Relief(p9)

rule
The IRS will consider all of the facts and circumstances in order to determine whether it is unfair to hold you responsible for the understated or underpaid tax. The following are examples of factors that the IRS will consider to determine whether to grant equitable relief. The IRS will consider all factors and weigh them appropriately.
taxmap/pubs/p971-004.htm#en_us_publink100098646

Relevant Factors(p9)

rule
The following are examples of factors that may be relevant to whether the IRS will grant equitable relief.
taxmap/pubs/p971-004.htm#en_us_publink100098647

Knowledge or reason to know.(p9)

rule
In the case of an underpaid tax, the IRS will consider whether you did not know and had no reason to know that your spouse (or former spouse) would not pay the income tax liability.
In the case of an income tax liability that arose from an understated tax, the IRS will consider whether you did not know and had no reason to know of the item causing the understated tax. Reason to know of the item giving rise to the understated tax will not be weighed more heavily than other factors. Actual knowledge of the item giving rise to the understated tax, however, is a strong factor weighing against relief. This strong factor may be overcome if the factors in favor of equitable relief are particularly compelling.
taxmap/pubs/p971-004.htm#en_us_publink100098648
Reason to know.(p9)
In determining whether you had reason to know, the IRS will consider your level of education, any deceit or evasiveness of your spouse (or former spouse), your degree of involvement in the activity generating the income tax liability, your involvement in business and household financial matters, your business or financial expertise, and any lavish or unusual expenditures compared with past spending levels.
taxmap/pubs/p971-004.htm#en_us_publink100098649

Example.(p9)

You and your spouse filed a joint 2009 return. That return showed you owed $10,000. You had $5,000 of your own money and you took out a loan to pay the other $5,000. You gave 2 checks for $5,000 each to your spouse to pay the $10,000 liability. Without telling you, your spouse took the $5,000 loan and spent it on himself. You and your spouse were divorced in 2010. In addition, you had no knowledge or reason to know at the time you signed the return that the tax would not be paid. These facts indicate to the IRS that it may be unfair to hold you liable for the $5,000 underpaid tax. The IRS will consider these facts, together with all of the other facts and circumstances, to determine whether to grant you equitable relief from the $5,000 underpaid tax.
taxmap/pubs/p971-004.htm#en_us_publink100098650

Factors Weighing in Favor of Equitable Relief(p10)

rule
The following are examples of factors that will weigh in favor of equitable relief, but will not weigh against equitable relief.