IRS Streamlines Innocent Spouse Relief

The Internal Revenue Service has issued new guidance and streamlined procedures for spouses who are seeking equitable relief from joint income tax liability.

Revenue Procedure 2013-34 supersedes the earlier Revenue Procedure 2003-61. It provides the threshold requirements for any request for equitable relief and sets forth conditions under which the IRS will make streamlined relief determinations granting equitable relief from an understatement of income tax or an underpayment of income tax reported on a joint return, or the operation of community property law.

The revenue procedure also provides a nonexclusive list of factors for consideration in determining whether relief should be granted because it would be inequitable to hold a requesting spouse jointly and severally liable when the original conditions under the Tax Code are not met.

The factors also will apply in determining whether to relieve a spouse from income tax liability resulting from the operation of community property law under the equitable relief provisions.

The revenue procedure applies to spouses who request either equitable relief from joint and several liability under Section 6015(f) of the Tax Code, or equitable relief under Section 66(c) from income tax liability resulting from the operation of community property law.

In 2011, the IRS eliminated the two-year statute of limitations on requests for innocent spouse relief (see IRS Eliminates 2-Year Limit on Innocent Spouse Requests). The new revenue procedure notes that if the requesting spouse is applying for relief from a liability or a portion of a liability that remains unpaid, the request for relief must be made on or before the Collection Statute Expiration Date, or the date the period of limitation on collection of the income tax liability expires, as provided in section 6502. “Generally, that period expires 10 years after the assessment of tax, but it may be extended by other provisions of the Internal Revenue Code.”

The new revenue procedure also provides that if the nonrequesting spouse abused the spouse who is requesting relief from the IRS, or maintained control over the household finances by restricting the requesting spouse’s access to financial information, and because of the abuse or financial control, the requesting spouse was not able to challenge the treatment of any items on the joint return, or to question the payment of the taxes reported as due on the joint return or challenge the nonrequesting spouse’s assurance regarding payment of the taxes, for fear of the nonrequesting spouse’s retaliation, then the abuse or financial control will result in satisfying the factor needed for a streamlined determination even if the requesting spouse knew or had reason to know of the items giving rise to the understatement or deficiency, or knew or had reason to know that the nonrequesting spouse would not pay the tax liability.

Revenue Procedure 2013-34 will be published in Internal Revenue Bulletin 2013-42 on Oct. 7, 2013.