Tax Attorney – Bellevue And Seattle IRS Innocent Spouse Relief
Assuming a joint return was filed, the form used to make an election for relief administratively is the Form 8857. Either or both of the spouses who filed a joint income tax return may make an election for relief under section 6015(b) or 6015(c), or a request for relief under section 6015(f). If only one spouse makes the election, and relief is granted in whole or in part, that spouse is responsible only for whatever portion of the understatement or underpayment (if any) is attributable to that spouse’s “items,” and the other spouse remains jointly and severally liable for the entire understatement or underpayment. In order to make an election for relief under section 6015(c), the electing spouse needs to be legally separated, divorced, widowed, or living apart from the other spouse for the 12 month-period prior to making the election. For relief under section 6015(b), marital status is irrelevant; while under section 6015(f) relief, it is one of a number of factors to be weighed.
Section 6015(b) provides relief from joint and several liability to those joint filers who can prove they did not know, nor could they have known, of erroneous items on the return attributable to the nonrequesting spouse, and that it will be inequitable to hold them liable for the joint liability. Because the requesting spouse is often still married to, and often still living with, the nonrequesting spouse, satisfying the burden associated with obtaining relief under section 6015(b) is a challenge. Section 6015(b) relief is also available to a divorced, separated, widowed spouse who has already paid the deficiency and is seeking a refund.
A person successfully electing relief under section 6015(c) will limit his or her liability for any deficiency on the return to that portion of the deficiency attributable to him or her. However, it is required at the time of the election, that the requesting spouse either was not married to, was legally separated from, or was not a member of the same household for the previous 12-month period as, the person with whom a joint return was filed. (A widow qualifies). If successful under Section 6015(c), the taxpayer will owe only the taxes attributable to their income and deductions from the period.
The equitable relief provision is contained in Section 6015(f). The IRS has discretion to grant relief from a joint liability in situations where relief is unavailable under sections (b) or (c), but the Tax Court has jurisdiction to review, and reverse or revise, the Commissioner’s determinations if the Court finds there was an abuse of discretion. This is a wide-open category where the IRS considers many factors. This will be the only relief available under Section 6015 if it is beyond two years from the commencement of collection action.
An administrative election or request for relief under section 6015 is made using Form 8857. The original one page form has been replaced by a four page version designed both to determine eligibility to seek relief, and to obtain basic relevant facts about the taxpayer. The form is designed to enable a request for relief for up to three years on a single form. Additional pages may be attached if additional years involve substantially the same facts and the provision upon which relief is sought is the same. An additional explanation should be prepared by an experienced tax attorney as it is hard to make the proper legal argument in the Form 8857 alone. Relief under section 6015 may also be raised for the first time in a petition to the Tax Court.
According to the statute, the election under section 6015(b) must be made no later than two years after the date on which the Service began “collection activities” with respect to the requesting spouse. If none of the “collection activities” events occurs, the two-year period will not begin to run, and the taxpayer will have an open-ended period within which to file the election. Under section 6015(c), a request for relief may not be made earlier than the time when a deficiency for the year is asserted, but no later than two years after the date on which collection activities begin with respect to the requesting spouse. Importantly, the two-year period does not begin to run until collection activity is specifically directed to the requesting spouse in a manner to put such spouse on notice. Generally, if it is two years after collection action has commenced, equitable relief under §6015 will be the only option available to the taxpayer.
When an election or request for relief is submitted to the Service under section 6015, a freeze is placed on the taxpayer’s account and collection is suspended until a notice of determination is issued, plus 90 days, or if a petition is timely filed with the Tax Court, until a decision of the Tax Court becomes final.
Under section 6015(e), a taxpayer who has elected or requested relief administratively using the Form 8857, and who either has the claim rejected, or does not have his or her claim accepted or rejected within 6 months of its submission, may petition the Tax Court to determine the appropriate relief for the taxpayer under the statute. Generally, if relief is granted under Section 6015, the taxpayer’s liability will be adjusted accordingly and the non-requesting spouse will remain liable for the remainder. However, full discharge of liability is a possibility.