Pub 971

Publication 971 covers a wide range of issues, including the tax treatment of married couples who file jointly and when spouses can be relieved of their taxes through innocent spouse relief or separation of liability relief.

Publication 971 (Pub 971) also known as “Innocent Spouse Relief,” provides guidance for individuals who are requesting relief from joint liability for taxes owed on a joint return. It covers the Innocent Spouse Program, which allows qualifying taxpayers to be relieved of responsibility for paying taxes, interest, and penalties that resulted from their spouse’s (or former spouse’s) erroneous or fraudulent activities.

The publication provides information about the eligibility requirements for innocent spouse relief, the different types of relief available, and the process for requesting relief. It explains the conditions under which a taxpayer may qualify for innocent spouse relief and provides guidance on how to complete Form 8857, Request for Innocent Spouse Relief.

What is Innocent Spouse Relief?

Innocent spouse relief excuses you from paying interest and penalties for deductions, credits, or income that were wrongly reported or omitted from your current or former spouse’s tax return. You must file for this type of relief within two years of the IRS’s first attempt to collect the tax. You must also show that you had no actual knowledge or reason to know about the error and that holding you responsible for the understated tax is unfair.

The IRS offers several types of innocent spouse relief, including separation of liability, equitable relief, and erroneous claim denial. The IRS considers many factors, including the nature of the tax error, whether you benefited from it, and other facts and circumstances when determining who qualifies for this type of relief.

To request innocent spouse relief, you complete Form 8857 and include a statement explaining why you qualify for this type of relief. The IRS may contact your current or former spouse to verify your statements. The IRS will review your request and either approve or deny it. If you disagree with the decision, you can appeal it to IRS Appeals. You can take your case to the United States Tax Court if you do not appeal the decision.

Difference Between Publication 971 and Transcript Code 971
Pub 971 1

Difference Between Publication 971 and Transcript Code 971

While many taxpayers may confuse Publication 971 and the IRS Code 971, these two are not the same. While the publication refers to tax relief, the code indicates the IRS’s actions while processing a tax return. When a taxpayer sees this code on their transcript, it generally means that they will either be subject to additional review or that the IRS needs more information.

Although seeing a code on your tax account transcript can seem intimidating, it is nothing to panic about. In fact, this is an indication that the IRS will conduct additional review of your return or that they need more information to approve your tax refund.

The official designation for Code 971 is Miscellaneous Transactions, meaning that it can show up on a tax account transcript for any number of reasons. It can be accompanied by other transaction codes, such as Code 570, which is used to indicate that the IRS has requested additional information from you.

A specific amount on the 971 line will indicate the adjusted return amount. Depending on the other listed codes, this can vary widely in size. In most cases, the amount will be auto-adjusted, and you will not need to take any action unless otherwise stated. If you are unsure about the changes being made, contact your local Ideal Tax professional for assistance.

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