In the recently issued Notice 2012-8, the IRS proposed a new Revenue Procedure that would revise the threshold requirements for requesting equitable innocent spouse relief. The proposed Revenue Procedure would revise the factors used by the IRS in evaluating requests for innocent spouse relief submitted under Code Sec. 6015(f) when the facts and circumstances warrant. The guidelines would ensure that, when appropriate, requests are granted in the initial stage of the administrative process.
Generally, each spouse is jointly and severally liable for the tax, interest, and penalties (other than the civil fraud penalty) arising from a joint tax return. Code Sec. 6015(b) (regular innocent spouse relief) and Code Sec. 6015(c) (relief for separated or divorced individuals) provide two possible scenarios under which relief from join liability is available for innocent spouses. Where relief is not available under those sections, Code Sec. 6015(f) allows relief to a requesting spouse if, among other conditions, taking into account all the facts and circumstances, it is inequitable to hold the individual liable. This type of relief is known as “equitable innocent spouse relief”.
Notice 2012-8 provides a proposed Revenue Procedure that would update Rev Proc 2003-61, which provided guidance on equitable relief under Sec. 6015(f). The proposed revenue procedure would update the criteria used in making innocent spouse relief determinations for Code Sec. 6015(f) equitable relief cases and revise the factors for granting equitable relief to ensure that requests for innocent spouse relief are granted when the facts and circumstances warrant and that, when appropriate, requests are granted faster, in the initial stage of the administrative process.
Significantly, the proposed Revenue Procedure would expand how IRS will take into account abuse and financial control by the nonrequesting spouse in determining whether equitable relief is warranted. The proposed Revenue Procedure would provide that abuse or lack of financial control may mitigate other factors that might otherwise weigh against granting equitable relief under Code Sec. 6015(f). In addition, lack of economic hardship, which previously was treated as a factor against granting of the relief, will be treated neutrally and not count against the spouse requesting the relief.
You can view the full text of the notice at http://www.irs.gov/pub/irs-drop/n-12-08.pdf.
Former IRS tax attorneys at Holtz, Slavett & Drabkin can help you to analyze your fact situation and advise you on the issue of innocent spouse relief. You can contact us and arrange for a consultation at (310) 550-6200.
Copyright (c) 2012 Igor S. Drabkin. All Rights Reserved.