Indiana’s Unique Approach to Joint Income Tax Returns & Innocent Spouse Relief
In the realm of state income tax, Indiana stands out for its distinctive approach to joint income tax returns. While many states impose joint and several liability on such returns, Indiana takes a different path. In Indiana, spouses filing a joint return are protected from incurring income tax from items attributed to the other spouse. However, despite this built-in protection, the state often seeks to collect tax liabilities from both spouses without first determining individual responsibility.
The Norm: Joint and Several Liability
In most states, filing a joint income tax return comes with joint and several liability. This means that both spouses are collectively responsible for the full amount of tax, as well as penalties and interest that may accrue, similar to the federal method.
Indiana’s Unique Approach: No Joint and Several Liability
On the other hand, Indiana distinguishes itself by not imposing joint and several liability on joint income tax returns. This means that spouses filing jointly in Indiana should be shielded from incurring income tax from items attributed to their partner. This helps ensure that spouses are not held accountable for tax obligations beyond their control.
Collecting from Both Spouses:
Despite this measure, the Indiana Department of Revenue (IDOR) sometimes attempts to collect tax liabilities from both spouses as they are unsure who should be responsible for which portion of the liability. This practice can result in an unfair financial burden on one spouse, especially when they are not at fault for the tax liability.
Innocent Spouse Relief and form Schedule IN-40PA:
To address this issue, IDOR has established a form and procedure for applying for “Innocent Spouse Relief.” This relief mechanism allows taxpayers to demonstrate to the state how the tax liability should be allocated and provide evidence that they should not be held responsible for specific tax items that belong to their partner.
To apply for Innocent Spouse Relief after you have filed a tax return or received a tax refund, make sure you have the following information:
(1) Your federal income tax return, Form 1040 or 1040-SR, for the applicable tax year(s);
(2) All W-2 Forms, 1099 Forms, and any other income statements or forms showing the amount of state and county income tax withheld for both spouses;
(3) A detailed letter explaining the sources of your and your spouse’s income, deductions, credits, and any additional information relevant to computing your and your spouse’s individual tax liabilities; and
(4) A copy of the Indiana income tax return and all schedules for the applicable year(s).
Low Income Taxpayer Clinic Law Clerk