News & Resources
New Rule for Innocent Spouse Relief
IRS changes the rule for innocent spouse requests.
September 2, 2011
Do you believe that amounts owed to the IRS should really be only the responsibility of your spouse or ex-spouse? If you find yourself in this situation, you can apply for what the IRS calls innocent spouse relief.
Innocent Spouse Relief is an IRS term meaning that, if you qualify as an innocent spouse, you do not have to pay additional tax owed if your spouse or former spouse failed to report income, or reported income improperly, or claimed improper deductions or credits or your joint tax return.
To qualify for innocent spouse relief, you must meet all of the following conditions set by the IRS:
-
You filed a joint return, which has an understatement of tax, directly related to your spouse's erroneous items. Any income omitted from the joint return is an erroneous item. Deductions, credits, and property bases are erroneous items if they are incorrectly reported on the joint return.
-
You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax.
-
Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.
The previous IRS rule required applying for innocent spouse relief no later than 2 years after the date the IRS first attempted to collect the tax from you. Many taxpayers did not know of the problem in time to claim innocent spouse relief. The new rule eliminates the two-year limit for filing.
You should file Form 8857 as soon as you become aware of a tax liability for which you believe only your spouse or former spouse should be held responsible. The IRS will extend help to more innocent spouses by eliminating the two-year time limit that now applies to certain relief requests. After a thorough review:
- 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 7/25/2011, and details are in Notice 2011-70 posted on IRS.gov.
Please contact our tax professionals at 877.517.6872 if you have questions about this, or any other tax issues.
|
