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Archive for Innocent Spouse

Innocent Spouse Taxpayer Court Case

Donna M. Sutherland v. Comm’r, No. 3634-18, T.C. Memo 2021-110 | September 16, 2021 | Lauber | Dkt. No. 3634-18

Short Summary:  This is an innocent spouse case in which the taxpayer, Ms. Sutherland, sought relief from joint and several liability under the equitable relief provision of 26 U.S.C. 6015(f).  The Court ultimately found that the taxpayer was not entitled to the relief requested.

Key Issues:

  • Did the taxpayer qualify for relief from joint and several liability for the unpaid employment taxes that accrued from taxpayer’s husband’s business?

Facts and Primary Holdings:

  • The taxpayer was married to her husband Scott in 1990. She has a high school education and completed a few college courses.  She gave birth to the couple’s only child in 1991, and after her child was born, she worked primarily at home or in Scott’s business.

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Recent Bankruptcy Court Ruling Addresses The Jurisdiction of Bankruptcy Courts To Hear Innocent Spouse Relief Cases

Recent Bankruptcy Court Ruling Addresses The Jurisdiction of Bankruptcy Courts To Hear Innocent Spouse Relief Cases

The recent case of In re Bowman, Case No. 20-11512, Section A (Bankr. E.D. La., July 12, 2021) addresses an interesting intersection of tax and bankruptcy law.  Specifically, it looks at the issue of whether bankruptcy courts have jurisdiction to grant a debtor relief as an “innocent spouse” under § 6015 of the Internal Revenue Code, and ultimately determines that it does.

Although it is true that Section 6015(f) does not allow a bankruptcy court to exercise initial subject matter jurisdiction over an innocent spouse defense because only the Secretary of the IRS receives the equitable power to grant innocent spouse relief under that Section, in this case, it was undisputed that the Debtor sought such relief from the Secretary in July 2019 and the Secretary denied the request.  The bankruptcy court determined that § 6015(e)(1)(A) confers subject-matter jurisdiction to determine whether innocent spouse relief should be granted when it is denied by the Secretary. Citing to Pendergraft v. I.R.S. (In re Pendergraft), Adv. No. 16-3246, 2017 WL 1091935, at *3-4 (Bankr. S.D. Tex. Mar. 22, 2017), the Court explained:

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Innocent Spouse: Are You Being Pursued For Taxes You Know Nothing About?

Venar Ayar- Innocent Spouse

A significant number of couples choose to file joint taxes to mainly take advantage of the higher standard deductions and other benefits that married couples enjoy. However, most of these couples do not understand the legal ramifications that come with the joint-filing status. The government, for example, is allowed to come after either spouse in the event that there is a debt or wrongdoing by the other partner. If you are facing such a problem, this is where innocent spouse relief can help you. Having this problem in the midst of a divorce can make it even more complex since divorces are mostly traumatic.

All you need to know about innocent spouse relief

While it is possible for an innocent spouse to get some relief, this can only be possible under the right circumstances. First, this relief is only available for income taxes since employment taxes are excluded. Second, the relief can only be invoked by spouses that filed a joint income tax return. Those that filed returns on the basis of married filing separate are not entitled to the relief since everyone in such an arrangement is responsible for their taxes. Third, the IRS and even the courts are likely to disregard any tax liability that a couple may have set out in their divorce proceedings. Finally, it is also important to check with the laws from your state to ensure that you can get relief from both the IRS and your state.

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