Wednesday, April 27, 2011

Several Senators Call For Changing Time Limit For Seeking Innocent Spouse Equitable Relief

Three senators have called on IRS to modify a provision in Rev Proc 2000-15, 2000-1 CB 447 and Rev Proc 2003-61, 2003-2 CB 296 regarding the deadline for filing for “innocent spouse” relief from joint tax liability. (April 18 letter to IRS Commissioner Douglas Shulman) In their letter to Commissioner Shulman, Senate Finance Committee Chairman Max Baucus (D-MT), and Senators Sherrod Brown (D-OH) and Tom Harkin (D-IA), stressed that the intent of Congress in first addressing the issue of innocent spouse relief was to “make it easier” for affected individuals to obtain such relief. “In addition to granting relief under two specific circumstances, the new innocent spouse rules allowed the IRS to grant “equitable relief” if, considering all the facts and circumstances, it would be inequitable to hold a spouse liable for a joint deficiency or unpaid tax arising from a joint return,” the letter said. “The IRS Restructuring and Reform Act did not set a time limit within which taxpayers must request equitable relief, thereby implying that taxpayers may request equitable relief at any time during the 10-year collection statute of limitations,” the letter continued. Nevertheless, IRS guidance established a deadline for filing for equitable relief claims of two years from the date of IRS's first collection activity. “The two-year limitation on claims for equitable relief prevents innocent spouses from receiving the relief they deserve,” the senators wrote. “In many cases, the two-year limitation serves to deny equitable relief to the very taxpayers the law was designed to reach, such as innocent spouses unaware of IRS collection activities because of intimidation or deception on the part of the joint filer,” the senators noted. The letter can be found at

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