Generally, if a married couple file a joint return, each spouse is liable for the tax and for interest and penalties that may arise (with a few exceptions). The Internal Revenue Code, however, provides relief for some spouses if it is deemed inequitable to hold them liable. To take one common example, if tax was underpaid, a spouse can be relieved of the tax burden if the requesting spouse did not know and had no reason to know that money intended to pay the tax had instead been used elsewhere.
The IRS recently released new and clarified regulations regarding innocent spouse relief. These include changing the time frame from two years after the first collection notice is received to the full statute of limitations for collection of the tax. The new guidelines give afford greater weight to the presence of abuse and how it can affect other relevant factors. For example, absent abuse the requesting spouse’s knowledge of the underpayment or deficiency weighs against the request for relief, but in cases of abuse the knowledge can actually weight in the spouse’s favor.
The IRS has clarified how economic hardship — that is, how the requesting spouse would be negatively effective economically if denied relief — is factored in, including minimum standards for determining economic hardship. The lack of such a hardship is no longer a mark against the spouse seeking relief.
Previously, a requesting spouse’s compliance with subsequent tax laws was always treated as neutral toward relief. Now compliance will weigh in their favor.
Horowitz Law Offices represents taxpayers before the Internal Revenue Service and the Illinois Department of Revenue for innocent spouse relief and other tax matters. You are welcome to contact us at (312) 787-5533 or firstname.lastname@example.org