Married taxpayers who file jointly are jointly and severally liable for any tax, interest and penalties due as shown on the return and also any additional tax liability the IRS determines to be due. § 6013(d)(3). This is true even if the taxpayers later divorce, or if the other spouse earned all the income. Relief from joint and several liability may be available under IRC § 6015. The Innocent Spouse provisions should not be confused with an Injured Spouse claim (discussed below) filed using Form 8379 to receive an allocation of an overpayment.
In 1998, Congress amended prior law and provided three forms of relief from joint and several liability. Before the amendment it was more difficult to obtain relief. Now, Section 6015 profides for three alternative types of relief:
Guidance on the administrative appeals rights for the non-requesting spouse is contained in Rev. Proc. 2003-19.
To receive "innocent spouse relief" the taxpayer must:
If it is established that the taxpayer signed a joint return under duress, then a joint return has not been filed.
Understatement of Tax: An understatement of tax is generally the difference between the total tax liability that should have been shown on the return and the amount that was actually shown on the return. § 6662(d)(2)(A).
Underpayment of tax: An underpayment of tax is an amount of tax the taxpayer properly reported on the return but has not paid. For example, a joint 2000 return shows that the taxpayer and his spouse owe $5,000. They paid $2,000 with the return and in tax withholding. They have an have an underpayment of $3,000.
A taxpayer may qualify for partial relief if, under § 6015(b), at the time she filed her return, she knew or had reason to know that there was an understatement of tax due to her spouse's erroneous items, but she did not know how large the understatement was. She will be relieved of the understatement to the extent she can prove that she did not know about it and had no reason to know about it.
Erroneous items are either of the following:
The following are examples of erroneous items:
Knowledge or reason to know: Regulation § 1.6015-2(c) states that a requesting spouse has knowledge or reason to know of an understatement if he or she actually knew of the understatement, or if a reasonable person in similar circumstances would have known of the understatement. Facts and circumstances considered in determining whether a requesting spouse had reason to know of an understatement include, but are not limited to:
Indications of unfairness: The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold the taxpayer responsible for the understatement. Two indicators the IRS may use in deciding that it is unfair to hold the taxpayer responsible are whether she:
Under this type of relief, there is an allocation of the understatement of tax (plus interest and penalties) on the joint return between the taxpayer and the spouse (or former spouse). This type of relief is not available for a an underpayment of tax. Also, refunds are not granted when there is separation of liability relief granted. When relief is granted, the understatement of tax allocated to the taxpayer is generally the amount he or she is responsible for. Taxpayers may request this type of relief in addition to innocent spouse relief.
Requirements: To request relief by separation of liability, a taxpayer must have filed a joint return and must meet one of the following requirements at the time he or she files Form 8857:
If the taxpayer does not qualify for innocent spouse relief, relief by separation of liability, the taxpayer may still be relieved of responsibility for tax, interest, and penalties through the IRS provisions for equitable relief.
Requirements: The taxpayer may qualify for equitable relief if all of the following conditions are met:
Unlike innocent spouse relief or separation of liability, the taxpayer may obtain equitable relief from both an understatement of tax or an underpayment of tax (defined earlier under Innocent Spouse Relief).
The IRS will consider all of the facts and circumstances in order to determine whether it is unfair to hold the taxpayer responsible for the understatement or underpayment of tax. The IRS will consider all factors and weigh them appropriately. There are positive and negative factors.
The following are examples of factors that weigh in favor of equitable relief:
The following are examples of factors that weigh against equitable relief:
To request for Innocent Spouse Relief, Separation of Liability, or Equitable Relief, the IRS requires taxpayer to complete and file IRS Form 8857. The taxpayer only needs to file one Form 8857, even if she is requesting relief for more than one tax year. The taxpayer must attach a statement to Form 8857 explaining why she believes she qualifies for relief and attach thereto supporting exhibits. She must also provide certain information for each type of relief she is requesting. The instructions for Form 8857 offer more information pertaining to the required information. The request is accompanied by a Memorandum setting forth the facts and law (see below for a sample), cover letter to the IRS addressed to their office in Covington, Kentucky, and applicable exhibits including the originally signed Innocent Spouse relief form 8857.
The IRS is required to inform the spouse (or former spouse) if taxpayer requests innocent spouse relief or separation of liability and to allow the spouse (or former spouse) to participate in the determination of the amount of relief from liability. You should inform your client that the IRS will attempt to contact his or her former spouse and advise him or her of the request for relief. To protect victims of domestic abuse, the IRS has adopted several measures. You should consult the IRS web site in this situation and write on the top of Form 8857 "Potential Domestic Abuse Case."
The client can raise innocent spouse in the Tax Court in two ways. First, within 90 days after the IRS mails the taxpayer a negative final determination notice indicating that the IRS denied relief, the client may petition the U.S. Tax Court to review the denial. This is a statutory period of time that may not be extended. If taxpayer does not file a petition, or files it late, the Tax Court cannot review the request for relief.
An appeal of an IRS denial of spousal relief may be conducted under the small tax case procedures only if the amount of relief sought, including accrued but unassessed interest and penalties, does not exceed $50,000 on the date the petition is filed. Otherwise, the petition for review of the IRS' denial of relief must be filed under the regular procedure.
A taxpayer may also file a petition in U.S. Tax Court if she has not received a final determination notice from the IRS within 6 months from the date he or she filed Form 8857.
The second way the innocent spouse relief can be raised in Tax Court is as a defense. If the IRS examines a joint return a spouse may petition the U.S. Tax Court and raise innocent spouse as a defense to the assertion of the deficiency in addition to asserting other defenses to the deficiency. If the Form 8857 has not previously been prepared, the form should be included with the notebook signed originally.
In either case in Tax Court, the student attorney will prepare a memorandum, cover letter and applicable exhibits, which are included in a notebook address to either the appeals officer assigned or Chief Counsel attorney depending on where jurisdiction resides.
Under limited circumstances refunds of tax are permitted if relief from joint and several liability under § 6015 is granted, as follows:
A request for relief under § 6015(b) and (c) but not (f) must be filed no later than 2 years from when collection activity first begins after July 22, 1998. § 6015(b)(1)(E), (c)(3)(B);
Reg.§ 6015-5(b) currently provides that the 2 year limit on relief applies to relief requested under § 6015(f); however, the Notice 2011-70 (see link below) revokes so much of the above regulation as limits § 6015(f) claims to a 2 year period.
Collection activity, for this purpose, begins when the requesting spouse receives:
Collection activity does not include:
Relief at a Glance Chart.pdf
Sample Innocent Spouse Memorandum.doc
Innocent Spouse Questionnaire.doc
Internal Revenue Service Innocent Spouse Checklist.pdf
Innocent Spouse Relief Request Cover Letter.doc
Information on IRS.gov
Change in Litigating Position on the Two-Year Deadline to Request Section 6015(f) Equitable Relief - CC-2011-17
Two-Year Limit No Longer Applies to Many Innocent Spouse Requests - IR-2011-80
Equitable Relief under Section 6015(f) - August 8, 2011 - Notice 2011-70
New rules for applying for Innocent Spouse Relief (Scroll to page 296) - Revenue Procedure 2003-61.pdf
Grant of Innocent Spouse Relief Does Not 'Abate' Tax Liability - Chief Counsel Advice.pdf
Advice to attorneys on handling of Tax Court cases in light of Lanz. - Chief Counsel Advice.doc
Tax Court Stands by Its Holding in Lantz (9-22-10) - Tax Notes 9-23-10
Innocent Spouse Relief - IRS Publication 971.pdf
Request for Innocent Spouse Relief Form - Form 8857.pdf
Innocent Spouse Relief Brochure - IRS Publication 3212.pdf
Innocent Spouse Request for Information - Form 12508.pdf
Injured Spouse Claim and Allocation - IRS Form 8379.pdf
Internal Revenue Code
IRC §66(c) Treatment of community income: Spouse relieved of liability in certain other cases
IRC §6013 Old section of code relating to Innocent Spouse relief
IRC §6015 Relief from joint and several liability on joint return