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Archive for Innocent Spouse Relief

Innocent Spouse Relief, Equitable Factors Under Section 6015(f)

Innocent Spouse Relief, Equitable Factors Under Section 6015(f)

Parker v. Commissioner, T.C. Memo. 2022-110 | November 15, 2022 |Paris, J.| Dkt. No. 6054-19

Short Summary: This case involves whether a taxpayer is entitled to relief from joint and several liability regarding a deficiency in federal income tax under 26 U.S.C. § 6015(f).  Haywood Earl Parker Jr. (Parker) and Jaqueline Ann Parker (Ann Parker) married in 1988 and divorced in April 2018. Parker has severe health problems and his only income as of 2012 arises from Social Security (SS) disability payments. Ann Parker received a ­settlement award in relation to a discrimination claim she asserted against her employer. The Parkers filed their joint tax return for 2016, where they excluded the attorney’s fees or noneconomic and compensatory damages from the settlement amount. They considered those amounts were non-taxable from a call held with the IRS.

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Tax Court Grants Innocent Spouse Relief

Tax Court Grants Innocent Spouse Relief

In the recent case of Todisco v. Commissioner of Internal Revenue, the Tax Court granted innocent spouse relief to the taxpayer, finding that it would be inequitable to hold her liable for the taxes at issue.  As a result, the taxpayer was relieved from joint and several liability for the taxes with her spouse, wiping away the taxpayer’s liability.

Our firm’s Insights Blog has covered Innocent Spouse relief in depth.  See, e.g., Innocent Spouse Relief Explained: Tax Relief for SpousesDo You Qualify for Innocent Spouse Relief?Innocent Spouse Relief: A Primer.  In this post, we look again at innocent spouse relief and the road map laid out by the Tax Court in Todisco to obtain relief under section 6015(b).

The General Rule of Joint Liability for Joint Federal Tax Returns

In general, married taxpayers can elect to file joint federal income tax returns.  If a joint return is filed, however, each spouse is jointly and severally liable for the entire tax due for that taxable year.

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Tax Court In Brief: When The Court Has Jurisdiction To Determine Appropriate Relief Even When Previously Denied

Tax Court In Brief: When The Court Has Jurisdiction To Determine Appropriate Relief Even When Previously Denied

Vera v. Comm’r, 157 T.C. No. 6 | August 23, 2021 | Buch, J. | Dkt. No. 9921-19

Short Summary

  • For 2010 and 2013, the years at issue, Petitioner Vera filed joint returns with her (then) spouse. For 2010, the Commissioner determined a deficiency that was assessed as a joint liability. For 2013, the tax shown on the return was not paid in full, resulting in an underpayment of tax. The Commissioner assessed the tax liability and associated penalties.
  • In early 2015, Petitioner filed a request for innocent spouse relief relating solely to the 2013 underpayment. She submitted Form 8857, Request for Innocent Spouse Relief, setting forth her grounds for relief. In March 2016, the Commissioner issued a final determination denying relief to Petitioner, writing that she did not meet the requirements for relief.
  • Petitioner challenged the Commissioner’s determination in Court, and that determination was ultimately dismissed for lack of jurisdiction.
  • Several months later, Petitioner submitted a request for relief for 2010, but in that request, she also re-raised her 2013 liability. The Commissioner denied the request for relief in a Final Appeals Determination Letter (dated March 14, 2019). The header of that letter specified only 2010 as the tax year, but the substance of the letter denied the request for relief as to both the 2010 and 2013 tax years. It read:
    • For tax year 2010, the information we have shows that you didn’t meet the requirements for relief.
    • For tax year 2010, you didn’t have a reasonable expectation that the person you filed the joint return with would or could pay the tax.
    • For tax year 2013, you didn’t comply with all income tax laws for the tax years that followed the years that are the subject of your claim.
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Innocent Spouse Relief Explained: Tax Relief For Spouses

Innocent Spouse Relief Explained: Tax Relief For Spouses

A topic that we frequently see in the Tax Clinic that I run, one that is often misunderstood, is that of innocent spouse relief.

Generally, the purpose of providing innocent spouse relief is to, as one court put it:  “protect one spouse from the overreaching or dishonesty of the other.”  Purcell v. Commissioner, 826 F.2d 470 (6th Cir. 1987).  But many people that come into the clinic think that it means that, if the other spouse earned the income, then they are automatically entitled to innocent spouse relief when the appropriate amount of tax does not get paid.  And that is simply not the case.

As I always do with my students, the place to start is the Internal Revenue Code, and the primary section we’re looking at as it relates to innocent spouse relief is Section 6015 – “Relief from joint and several liability on joint return.”  So Section 6015 starts with the lead-in of “Notwithstanding Section 6013(d)(3)”, so let’s start our analysis there:

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Feel Like You Are Not Responsible For A Debt Owed By Your Spouse Or Ex-Spouse?

ERIN COLLINS - NATIONAL TAXPAYER ADVOCATE

Taxpayer Advocate Service Tax Tip

Saying “I do” doesn’t necessarily mean you’re responsible for your spouse’s or ex-spouse’s debts.

If your spouse has a debt (this debt could be for any number of things – child support, spousal support, a federal debt (e.g., student loans), or a federal tax debt) and you file your taxes using the Married-Filing-Joint tax filing status, the IRS can apply your refund to one of these debts, which is known as an “offset”. Or they can take a collection action against you for the tax debt you and your spouse owe, such as filing of the Notice of Federal Tax Lien or issuing a levy. However, if you’re not legally responsible for the past-due amount, you may still be entitled to receive your share of the refund or request relief from joint and several liability, depending on the facts of the situation.

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