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Innocent Spouse Relief: IRS Now Limits Two Year Rule page item

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Innocent Spouse

Written by: Steven J. Fromm, J.D., LL.M. (Taxation)

Where someone files files a joint return, Section 6015 of the Internal Revenue Code provides innocent spouse relief to help a taxpayer who did not know and did not have reason to know that his or her spouse understated or underpaid an income tax liability. There are basically three kinds of innocent spouse relief:

  • Innocent spouse (Section 6015(b)
  • Separation of liablity (Section 6015(c)), and
  • Equitable relief (Section 6015(f)). 

Our discussion deals with the time deadline changes for the third, equitable relief provision.

The Internal Revenue Service announced on July 25, 2011 that it will extend help to more innocent spouses by eliminating the two-year time limit that now applies to equitable relief requests under Section 6015(f). This change to the two-year limit is effective immediately. (Note: The two year rule still applies for the other two forms of relief under Sections 6015(b) and (c).)  There have been numerous conflicting court cases on whether the two year rule applies to equitable relief under Section 6015(f).  The IRS has acted to resolve this conflict and confusion so as to be seen as more sensitive to the plight of many of these abused, victimized and innocent taxpayers.

The IRS policies and procedures with respect to these changes are slated to become fully operational in the fall and additional guidance will be forthcoming from them. However, the recent announcement states as to 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.

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