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Friday, July 29, 2011

IRS Policy Change Regarding Innocent Spouses May Present New Opportunities for Relief

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A recent change in the IRS’s policy regarding so-called “innocent spouse relief” under §6015(f) on equitable grounds may present a new opportunity for taxpayers to seek relief. Under Notice 2011-70, 2011-32 I.R.B. , effective July 25, 2011, the IRS no longer will require that a spouse submit a request for equitable relief under §6015(f) within two years of when the IRS first began collection activity against the spouse. For spouses who previously were denied §6015(f) relief solely because the request was untimely (and never appealed the decision to a court), Notice 2011-70 encourages such individuals to re-apply for §6015(f) relief by filing a new Form 8857, Request for Innocent Spouse Relief. The IRS will treat the original Form 8857 as a claim for refund for purposes of the §6511 refund limitations period, meaning that any amount for which a refund was available as of the date the original Form 8857 was filed, and any amounts later collected by the IRS, may be refunded if relief is otherwise warranted. (The IRS will only grant relief with respect to unpaid liabilities if the §6502 period of limitations on collection is open as of the date of the re-application).

For taxpayers who never pursued §6015 relief in the first instance, the elimination of the two-year deadline also means that a request for §6015(f) relief may be filed within 10 years of the IRS’s assessment of tax for the year(s) at issue. If one is seeking a credit or refund of tax, the request for equitable relief generally must be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever period expires later. (If no return was filed, the claim for credit or refund generally must be made within two years from the time the tax was paid).

by Ken Savell, Tax Law Editor (IRS Practice and Procedure Group)
 
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