Current Innocent Spouse Provisions (Part 1)

The IRS Restructuring and Reform Act of 1998 (hereinafter, “The Reform Act”) provides rules designed to make it easier to obtain innocent spouse relief.  These rules, set forth in IRC§6015 are effective for federal income tax and self-employment tax liabilities that arose after, or that arose on or before but which were unpaid as of July 22, 1998.

The Reform Act authorizes relief for an innocent spouse under three separate procedures.  The first two procedures are available for all qualifying filers of joint returns, and the third is available only for joint filers who are no longer married or living in the same household, or who are legally separated.

One set of procedures, available under §6015(b) for any filer, provides full relief from joint and several liability if the specific requirements are met.  Spouses of either gender may elect or request relief under §6015.  The following example demonstrates how the effective date rules for §6015 may operate to bifurcate the treatment of joint and several liabilities that were assessed before July 22, 1998 but that were paid in part before and after that date:

Example:  H and W file their joint federal income tax return for 1996 on April 15, 1997.  The IRS assesses a deficiency of $8,000 on Oct 1, 1997 for a disallowed charitable contribution.  On June 1, 1998, the IRS levies the bank account of W and collects the sum of $5,000.  On Sept 1, 1998, W files a request for relief from joint and several liability.  Because the liability arose before July 22, 1998 and payment was made in part before July 22, 1998, §6015 applies only to the $3,000 remaining unpaid on July 22, 1998.

(More to follow on this topic on our next blog)