Relaxed Restrictions for Tough “Innocent Spouse Relief” Rules

Jul 01, 2011   
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Taxpayers who are unfairly pinned with spousal tax liabilities may soon be met with relaxed filing restrictions for “innocent spouse relief,” a recent USA Today article reports. After public outcry against the strictly enforced filing deadline and its ramifications in sensitive cases, the IRS is reconsidering the rule and plans to announce changes in the coming weeks.

Currently, the IRS offers three forms of relief from joint and several liability for spouses who filed joint returns: innocent spouse relief, separation of liability relief, and equitable relief.  However, due to the inherent controversial nature of innocent spouse relief claims, they tend to raise the most problems. 

Under the current IRS guidelines, you must meet the following conditions to qualify for "innocent spouse relief":

  • 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; and
  • You request relief from the IRS no later than two years from the first date the IRS attempted to collect tax from you.

Perhaps in an attempt to combat fraudulent or frivolous claims, the IRS has set a notoriously high bar for granting innocent spouse relief.  In particular, the IRS has been unyielding with respect to the two-year deadline.  A taxpayer may have one of several legitimate reasons for missing the cutoff”including domestic abuse, divorce, fraud, and death”to no avail.  The IRS’ staunch refusal in a number of especially sensitive situations triggered an outcry of criticism from lawmakers and legal aid attorneys.  Critics argue that the strictly-enforced deadline is especially unfair to domestic abuse victims, who are often kept in the dark about their spouses’ finances.

The sensitive issue garnered bipartisan support in Congress.  Minnesota Rep. Michele Bachman, a Republican presidential candidate and former tax attorney, introduced legislation in the House that purports to remove the two year time limit for innocent spouse relief.  Similarly, House Democrats Pete Stark and Jim McDermott urged IRS to revoke the rule in a letter signed by 48 representatives, including all Democrats on the House Ways and Means Committee.  In the Senate, Finance Committee Chairman Max Baus, D-Mont, also called on the IRS to evaluate the rule. In response, the IRS acknowledged that their procedures need to be revised.  The Service says that it is “reviewing the innocent spouse rules” and plans to announce changes soon.

The attorneys at Fuerst Ittleman are adept and efficient in resolving tax refund and relief matters.  If you have a potential tax issue on your hands, contact an attorney at