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Innocent Spouse Relief

 
 

Why request Innocent Spouse Relief?  Many married taxpayers choose to file a joint tax return because of certain benefits this filing status allows. Both taxpayers are jointly and individually responsible for the tax and any interest or penalty due on the joint return even if they later divorce. This is true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns. One spouse may be held responsible for all the tax due.

The Internal Revenue Code allows for relief from certain joint tax liabilities for divorced persons if it can be shown that the delinquency was caused by "erroneous" information provided by the other spouse.  To qualify for innocent spouse relief, the following conditions must be established:

    • A joint return was filed for the year relief is requested.

    • There is an understatement of tax attributable to erroneous items of one individual filing the return.

    • The spouse did not know and had no reason to know of the understatement.

    • It would be inequitable to hold the person liable for the deficiency considering all the facts and circumstances.

    • The spouse elects the benefits of this provision before expiration of two years after collection action begins.

The IRS Restructuring and Reform Act of 1998 expanded the law with respect to relief from joint and several liability.  Internal Revenue Code Section 6015 was enacted to make relief from joint and several liability easier to obtain. There are now three kinds of relief available:

    • Innocent Spouse relief - IRC Sec. 6015(b)

    • Election to allocate a deficiency - IRC Sec. 6015(c)

    • Equitable relief - IRC Sec. 6015(f) & 66(c)

Internal Revenue Code Section 6015 is effective for the following:

    • Unpaid balances as of July 22, 1998 and

    • Liabilities arising after July 22, 1998.

Internal Revenue Code Section 6015(e) was added to enable taxpayers to petition the United States Tax Court to review denials of Innocent Spouse relief.


On July 25, 2001 the IRS announced that they are abolishing the two-year limit on many innocent spouse requests. The IRS launched a thorough review of the equitable relief provisions of the innocent spouse program earlier this year. Policy and program changes with respect to that review will become fully operational in the fall of 2011 and additional guidance will be forthcoming. However, with respect to expanding the availability of equitable relief:

    • The IRS will no longer apply the two-year limit to new equitable relief requests or requests currently being considered by the agency.
    • A taxpayer whose equitable relief request was previously denied solely due to the two-year limit may reapply using IRS Form 8857, Request for Innocent Spouse Relief, if the collection statute of limitations for the tax years involved has not expired. Taxpayers with cases currently in suspense will be automatically afforded the new rule and should not reapply.
    • The IRS will not apply the two-year limit in any pending litigation involving equitable relief, and where litigation is final, the agency will suspend collection action under certain circumstances.

The change to the two-year limit is effective immediately, and details are in Notice 2011-70, posted today on IRS.gov

Get immediate tax help by contacting us toll free at 877-426-3121 for a Consultation. Or fill in the following form to request a confidential tax analysis. Online Form

 

   

 

 

 

 

 

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