IRS to Review Innocent Spouse 'Timeline' Rules - John R. Dundon II, Enrolled Agent
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IRS to Review Innocent Spouse ‘Timeline’ Rules

IRS to Review Innocent Spouse ‘Timeline’ Rules

In a letter to lawmakers dated April 29, IRS Commissioner Doug Shulman promised to review the 2 year requirement for submitting IRS Form 8857 as part of its ‘Fresh Start’ program. Once a joint tax return is filed, both spouses together are liable for 100% of the taxes. If the naughty spouse doesn’t have the $$ to pay the tax liability the innocent spouse gets stuck with it unless he/she files an innocent spouse claim within a specific time frame. There are three types of relief from joint and several liability for spouses who filed joint returns:

  1. Innocent Spouse Relief provides you relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.

  2. Separation of Liability Relief provides for the allocation of additional tax owed between you and your spouse or former spouse because an item was not reported properly on a joint return. The tax allocated to you is the amount for which you are responsible.

  3. Equitable Relief may apply when you do not qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return and generally attributable to your spouse. You may also qualify for equitable relief if the correct amount of tax was reported on your joint return but the tax remains unpaid

There are certain conditions the IRS considers in deciding if you can be classified as an innocent spouse. which must be present within 2 years from the time the IRS begins collecting the tax debt including:

• Marital status
• Economic hardship
• Knowledge about nonpayment of taxes
• Subsequent compliance with income tax laws
• Signifcant economic beneft
• Abuse of requesting spouse
• Poor health
• Non-requesting spouse’s legal obligation to pay the outstanding liability

There is a push by some in congress to push the reporting limit from 2 years to 10 years.  This seems to make sense particularly in that the IRS can pursue collection efforts against tax payers for 10 years.