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Innocent Spouses of Tax Cheats Get More Relief

The IRS is making some common sense reforms to some of its arbitrary rules by instituting new guidelines in connection with “innocent spouse” relief requests”.

An innocent spouse is classified as a person that had no knowledge that his or her spouse was defrauding the IRS by underpaying their taxes.

Until this change in regulation, there was a two year limit that was applied to any innocent spouse attempting to file a relief request. The change applies to all future requests and will retroactively be applied to previously denied claims.

The IRS change only applies to the equitable relief provision. This provision absolves the innocent spouse of any liability in paying past due taxes and relieves them of any interest or penalties associated with the unpaid taxes. Innocent spouses must prove that at the time of signing the joint tax return, they had no knowledge of any wrongdoing on behalf of the guilty spouse.

If a request is approved, the IRS allows the innocent spouse to pay the taxes that they are responsible for, but relieves them of any penalties and fines associated with the misfiling of the taxes.

The intent of the law was that an innocent spouse would have two years to file a request for relief. However, this law did not take into account spouses that were victims of domestic violence and abuse.

Many members of congress have been lobbying for a change in the regulation for some time now. The IRS receives 50,000 requests annually for innocent spouse relief. Of those 50,000, 4%, or 2,000, requests are rejected because they are outside the 2 year limit.

This change in policy will now help 2,000 innocent spouses avoid the penalties and a fine for something that they were never aware was happening.

All future requests will be processed without looking at a term limit. However, if you have had a previous request denied due to the 2 year limit, you must file an IRS Form 8857 “Request for innocent spouse relief”. The IRS will not apply the two year limit in any active litigation

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