Return to Tax Industry News
 

Post Date:  8/8/2016
Last Updated:  8/8/2016

Summary
Cross References
- Form 8857, Request for Innocent Spouse Relief
- IRS Pub 971, Innocent Spouse Relief
- IRC §6015

In general, married taxpayers who file a joint federal income tax return are jointly and severally liable for the tax reported or reportable on the tax return. An exception applies if one spouse applies for and the IRS grants innocent spouse relief under IRC section 6015.

IRC Section 6015(b) relief. Under the innocent spouse rules of IRC section 6015(b), a spouse requesting relief is relieved of liability for an understatement of tax if all of the following are true:
a) A joint return was made for the taxable year in question,
b) There is an understatement of tax attributable to erroneous items of the non-requesting spouse,
c) The requesting spouse establishes that in signing the return he or she did not know and had no reason to know that there was an understatement,
d) Taking into account all the facts and circumstances, it would be inequitable to hold the requesting spouse liable for the deficiency attributable to the understatement, and
e) The requesting spouse elects to invoke IRC section 6015(b) relief within two years after the date the IRS has begun collection actions with respect to the requesting spouse.

IRC Section 6015(c) relief. Under the innocent spouse rules of IRC section 6015(c), a divorced or legally separated spouse may elect to limit liability for a deficiency on a joint return to the portion allocable to him or her. Thus, the tax liability shown on the jointly filed return is allocated between the spouses in approximately the same way it would have been had the individuals filed separately.

To be eligible for IRC section 6015(c) relief, all of the following must be true:
1) The spouses filed joint returns for the years involved,
2) At the time the election for relief is made, the spouses are legally separated, divorced, or have not been members of the same household anytime during the previous 12 months, and
3) The request for relief is made within two years of the first collection activity.

In addition to the above, no assets may be transferred between the spouses in a fraudulent scheme. Relief under IRC section 6015(c) is not available where the IRS demonstrates that the requesting spouse had actual knowledge at the time he or she signed the return of any item giving rise to a deficiency which is not allocable to the requesting spouse. Knowledge means an actual and clear awareness (as opposed to reason to know) of the existence of an item which gives rise to the deficiency. The fact that the requesting spouse may have reason to know of the omitted income or improper deduction is not actual knowledge. Actual knowledge means he or she has knowledge of the factual circumstances which made the item unallowable as a deduction.

See printable version for remainder of article.

Print Version:  Click here for a printable version of this document.