Innocent Spouse

Post Date: 1/16/12
Last Updated: 1/16/12

Summary

Cross References
• Notice 2012-8

The IRS is proposing to change the revenue procedure that provides guidance regarding the innocent spouse equitable relief provisions.

Background. An innocent spouse seeking relief from joint tax liability must meet all of the following conditions. 2) The return must have understatement of tax due to erroneous items of the taxpayer’s spouse,
3) The spouse seeking relief did not know of the understatement of tax, and
4) It would be unfair to hold the spouse seeking relief liable for the understatement of tax.

Relief from joint liability can be requested by filing Form 8857, Request for Innocent Spouse Relief.

Equitable relief. If the spouse seeking relief does not qualify for innocent spouse relief (for example, the spouse seeking relief knew about the understatement of tax), the taxpayer may still be eligible for equitable relief if it would be unfair to hold the innocent spouse liable for the understatement or underpayment of tax.

Proposed changes. The IRS is proposing to expand how the IRS will take into account abuse and financial control by the taxpayer in determining whether equitable relief is warranted for the innocent spouse. When a spouse has been abused, he or she may not have been able to challenge the treatment of any items on the joint return, question the payment of the taxes reported as due on the joint return, or challenge his or her spouse’s assurance regarding the payment of the taxes. Lack of financial control may also have an impact on the innocent spouse’s ability to satisfy joint tax liabilities. As a result, abuse or lack of financial control may mitigate other factors that might otherwise weigh against granting equitable relief.

Before issuing a final revenue procedure that expands the equitable relief analysis, the IRS is inviting public comment on the issue. See Notice 2012-8 for details on the proposed changes and how to provide the IRS with comments on those changes.
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