IRS Proposes to Extend Innocent Spouse Tax Relief Deadline

The Internal Revenue Service has proposed to extend for up to 10 years the amount of time that taxpayers would have to apply for the “innocent spouse” tax relief program.

The IRS issued REG-132251-11 on Monday, which proposes to expand from two to 10 years the amount of time that taxpayers could apply for innocent spouse relief so they are no longer responsible for the tax debts of estranged spouses. The document contains proposed regulations relating to relief from joint and several tax liability under Section 6015 of the Tax Code and relief from the federal income tax liability resulting from the operation of state community property laws under Section 66.

The proposed regulations also provide guidance to taxpayers on when and how to request relief under Sections 66 and 6015. This document also invites comments from the public regarding these proposed regulations.

The IRS said in 2011 that it would no longer require people to apply for innocent spouse relief within two years, bowing to demands over the years from taxpayers, practitioners, the National Taxpayer Advocate and members of Congress (see IRS Eliminates 2-Year Limit on Innocent Spouse Requests). In 2012, it expanded the relief to a greater number of taxpayers under newly proposed guidelines (see IRS Expands Innocent Spouse Relief). The proposed regulations issued Monday would make the 10-year deadline permanent. The innocent spouse relief would be retroactive to any requests filed on or after July 25, 2011.

Under the transitional rules, the two-year deadline would not apply to any request for equitable relief filed on or after July 25, 2011 (the date that the IRS issued Notice 2011-70 extending innocent spouse relief) or any request already filed and pending with the IRS as of that date. The transitional rules provide that the IRS will consider these current and future requests for equitable relief if they were filed within the applicable limitation period under Section 6502 or 6511. As for past requests for equitable relief—requests that the IRS denied as untimely under the two-year deadline—the notice allows the individuals who filed those requests to reapply for equitable relief, unless the individual litigated the denial or the denial included a  determination that the individual was not entitled to equitable relief on the merits. In addition, Notice 2011-70 provides separate rules for claiming equitable relief with respect to litigated cases.