New changes implemented by the IRS to the "Innocent Spouse" rule provide greater protection for those spouses seeking relief under the broadly described "inequity" provision of the rule. Generally, speaking, most spouses file joint tax returns and do not consider a subsequent tax liability that may befall upon them. In the face of such a scenario, the innocent spouse rule can provide relief from liability for a partner’s tax debt under certain conditions. For a greater sense of the rule and its specifics,review this prior entry on our blog and the linked alert previously issued by our Family Law Department on the topic.
New protections afforded by the legislative changes relieve claimants of the strict confines of a 2 year limitation on filing claims when the spouse claims that it would simply be inequitable to hold him or her responsible, which, in actuality, covers a broad spectrum of claims not encompassed by the other more narrow provisions leading to innocent spouse status. Previously under a claim of inequity, if the spouse did not file for relief within 2 years of receiving an IRS collection notice of the subject debt, that spouse was not entitled to relief. Oftentimes, an otherwise qualified spouse would be denied relief even if they did not know of the notice until after 2 years had passed (including cases where one spouse hid the notice from the other) or, even more specifically in the case of an abused spouse, knew of the notice but was too afraid to notify the IRS from fear of spousal retribution.
Significantly, this rule will seemingly apply both prospectively and retroactively, and the IRS may even suspend collection efforts on pending debts. Even better, if you were previously denied a claim for innocent spouse status under an inequity claim due to the 2 year rule, the IRS said that you can reapply for the very same relief in most cases. Suffice it to say, the relief for eligible "innocent spouses" can be life altering.