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Tag 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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Filing A Joint Tax Return When A Partner Has Back Taxes

Venar Ayar

Getting married means that you will share your life with your spouse in a lot of ways including your finances. With that being said, it is not uncommon to find spouses that did not talk about their finances before saying ‘I do’. This may bring about some unprecedented problems such as finding out that your partner owes back taxes. In most cases, you will still be liable for these back taxes too even if they were incurred before your marriage and you currently file joint returns. While this may seem unfair, the IRS has instituted a couple of options and tax reliefs to help spouses deal with their partner’s tax reliefs. Here are some of the options and tax reliefs that you can claim if your partner owes the IRS back taxes. But first.

Do You Know Where The Tax Debt Is Coming From?

Tax arrears and debt are not romantic things that spouses want to discuss, especially before marriage. However, it is imperative for marriage partners to understand each other’s financial situation. Is the debt from late child support payments? Is your spouse late in making student debt payment? Regardless of the reason or whether you are responsible for your spouse’s debt, the IRS views the joint return as a fair game. This means that once each of you signs a joint return, you are both responsible for any tax, interest or even penalty incurred by the other spouse. What can you do when you realize that your spouse owes the IRS when you file joint tax returns?

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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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The Flood That Didn’t Materialize When The IRS Removed The Two-Year Period For Requesting Equitable Innocent Spouse Relief And Granted Relief More Frequently

Innocent spouse relief, which has been available under IRC § 6015 since 1998 (and was available prior to that, in a more limited way, under IRC § 6015(e)), provides three avenues of relief. Section 6015(b) provides “traditional” relief for deficiencies.

Section 6015(c) also provides relief for deficiencies for certain spouses who are divorced, separated, widowed, or not living together, by allocating the liability between the spouses. Section 6015(f) provides “equitable” relief from both deficiencies and underpayments, but only applies if a taxpayer is not eligible for relief under IRC § 6015(b) or (c).

As I reported in my 2001 Annual Report to Congress, the IRS received 46,619 claims for innocent spouse relief in fiscal year (FY) 1999 (i.e., from October 1, 1998, to September 30, 1999). The IRS received 54,402 claims for relief in FY 2000.

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When To Request A Collection Due Process Hearing

What is A Collection Due Process Hearing?

A collection due process (CDP) hearing gives you one last chance to avoid a federal tax lien or tax levy. You will know you have a right to request a CDP hearing because you will receive a CDP notice. This notice is sent when any of the following IRS collection actions are being taken:

  • Filing of a Federal tax lien
  • Bank account levy
  • Jeopardy Levy
  • Levy on Your State Tax Refund

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The Case Of The Secret Divorce And The Not So Innocent Spouse

Question:

What do a weekend trip to Mexico, a sneaky spouse, and a tax protest letter have in common?

Answer:

They are all components of a taxpayer’s losing plea for tax relief in front of the California State Board of Equalization.*

THE FACTS

Charles and Vickie Sine filed a joint California resident tax return (Form 540) for tax year 2005.  It subsequently came to the attention of the Franchise Tax Board that they had Read more

Innocent Spouse Relief

Many married taxpayers choose to file a joint tax return because of the benefits to be derived from this filing status. On a joint return, both taxpayers are jointly and individually responsible for the tax and any interest or penalty due on the return, even if they later divorce. This is true even if a divorce decree should state that your former spouse will be solely responsible for any amounts due on previously filed joint returns.

The situation can exist, then, where one spouse could be held responsible for all the tax due, even if all the income was earned by the other spouse. In cases like this, the IRS, in the interest of equity may allow a spouse in such a situation to be relieved of tax, interest, and penalties that are due on the joint tax return. Read more

Who Is Liable To Pay Back Taxes When Filing Jointly?

“I didn’t do it! She did!” you say, as you sit in my office explaining the current, messy state of your financial affairs. Let’s say your wife failed to report her income from running a daycare facility out of your home, and since she handles your taxes, you had no idea. Now you’re separated, on the road to divorce, the IRS is calling you more often than your mother, and you need to know your options.

When married taxpayers file jointly, the letter of the law states that both taxpayers are “jointly and severally liable” for the tax, and “any additions to tax, interest, or penalties that arise as a result of the joint return even if they later divorce.”(IRS) That “severally” means that each spouse is entirely responsible for the whole sum of taxes, interest and penalties. So, even if one spouse earned all the income, the other spouse is just as Read more