Source: https://procedurallytaxing.com/requesting-innocent-spouse-relief-how-long-is-long-enough-to-request-relief-not-two-years-another-reflection-on-the-ntas-recent-innocent-spouse-blog/
Timestamp: 2019-04-21 08:41:15+00:00

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We welcome guest bloggers Robert Horwtiz, Hochman Salkin Rettig Toscher & Perez, P.C., and Carolyn Lee, Morgan, Lewis & Bockius LLP. Both Robert and Carolyn practice tax controversy and litigation in California. They each have extensive experience with section 6015 innocent spouse matters – many involving no- or low-income taxpayers. In addition, they each have a history of pro bono service including volunteering with state and county Bars and low-income tax clinics, and assisting taxpayers during the Tax Court Calendar Call. The comments and recommendations in this post are Robert’s and Carolyn’s personally, and do not represent the views of their firms or any Bar Association.
Recently Procedurally Taxing commented upon the May 23, 2018 National Taxpayer Advocate (NTA) blog discussing current trends in innocent spouse (§6015) determinations of relief. Another feature of the NTA blog was her observation about the effect on application volume of the IRS’s 2011 decision to accept requests for §6015(f) equitable relief through the end of the §6502 statutory collection period – typically at least ten years. The request period for equitable relief is significantly longer than the statutory two-year request period for the other two avenues to §6015 relief, §6015(b) (traditional relief) and §6015(c) (allocated relief). We believe this is a mistake. The §6015 request period should be the same for qualifying requesting spouses regardless of the avenue to relief, and it should extend through the end of the §6502 collection period.
The NTA noted that extending the equitable relief period from two years to at least ten years did not result in a tsunami of requests. Both the NTA and Procedurally Taxing blogs describe the judicial and legislative route to the longer period to request equitable relief. They observed that §6015(b) and §6015(c) were enacted in 1998 with a two-year request period. Also relevant to the discussion is that the earliest statutory versions of relief from joint and several liability for innocent spouses did not include a two-year limitation on the request period. Inexplicably, the two-year period was included with other, more beneficially expansive revisions to innocent spouse relief with the enactment of §6015 in 1998. The legislative history is silent about the selective limitation. Legend has it there was a concern the Agency would be overwhelmed with requests if the application period were longer. Thanks to the NTA’s research, we know this concern was unfounded.
We see no valid reason to maintain the two-year statutory period to request traditional or allocated relief. A person claiming relief as an innocent spouse under §6015(b), §6015(c) or §6015(f) should be allowed to elect relief at any time during which the IRS has authority to collect the tax underpayment. A truncated period to request relief under two of the three §6015 subsections is at odds with the character of the statute, which is to make the benefits of §6015 relief available to taxpayers who qualify on the merits of their facts and circumstances. A longer statute of limitations acknowledges the complexities of marital relations. Congress enacted three distinct legal remedial forms of §6015 relief. The two-year period to request the benefits of traditional or allocated relief effectively nullifies two §6015 subsections for many requesting spouses.
Last May, as part of the 2018 Washington DC delegation sponsored by the Taxation Section of the California Lawyers Association and the Taxation Committee of the Los Angeles County Bar, we spoke with representatives of the IRS, Treasury, and National Taxpayer Advocate, as well as House and Senate Tax committee staff members about such a change. We advocated for an amendment to §6015 to extend the period of time to request relief for §6015(b) and §6015(c) through the end of the §6502 collection period, as under §6015(f). In a happy coincidence, the Taxpayer First Act, HR 5444, had recently passed the House of Representatives without opposition and was pending in the Senate. The Taxpayer First Act is an ideal legislative vehicle to effect the proposed amendment, including as it does §11303 to codify the extended §6015(f) period to request relief through the end of the §6502 collection period. It is a noncontroversial – dare we say nonpartisan – matter to change §11303 to codify the same extended request period for all three avenues to relief.
Enactment of this simple statutory amendment will bring consistency and increased fairness relative to the statute’s first gate; i.e., the period for requesting relief. The amendment will make relief pursuant to §6015(b) and §6015(c) available to the taxpayers whom these separate forms of relief were intended to benefit, and whose requests are rejected because the two-year application period closed and they cannot qualify for equitable relief pursuant to §6015(f). The change will not increase stress on the IRS or the Tax Court, which have been administering and deciding §6015 matters for almost two decades. Any concern about an overwhelming volume of applications for relief may be assuaged based on data the NTA analyzed. (Please note that the NTA has not commented on the proposal to extend the statutory period of time to request relief from joint and several liability pursuant to §6015(b) and §6015(c).) All the other existing, rigorous requirements to qualify for relief remain the same. This proposal is not a liability give-away. It is no easy task to obtain relief.
The longer request period will make a material difference for requesting spouses who merit relief. Some clients may make a dash for a low-income tax clinic. For those clients, one might conclude the §6015(f) request period could have remained two years. No one is suggesting the NTA’s findings support that argument. However, in our experience, the current two-year request period is too short for most taxpayers dealing with unexpected erroneous tax items, typically during times of family, financial and emotional distress. We find that for every client who acts quickly on IRS collection correspondence there are many dozens more who cannot bring themselves to even open the envelope. Or the second envelope. Paralyzing panic sets in.
The two-year period for seeking relief under §6015(b) and §6015(c) can result in unduly harsh consequences for taxpayers too late to satisfy the statutory two-year period. This is especially true where the spouses do not divorce or become legally separated until after the two-year period, or begin living in separate households more than one year after collection activity begins. In addition, pro se taxpayers – the vast majority of taxpayers who might qualify for relief – likely find the two-year statute a trap for the unknowing. The unintentional adverse collateral consequences of the truncated statute of limitations to request relief pursuant to §6015(b) and §6015(c) have emerged as the law has been applied.
It is important to highlight that §6015(f) equitable relief is not a safety net for requesting spouses after the §6015(b) and §6015(c) gate shuts. Like §6015(b) and §6015(c), equitable relief under §6015(f) serves its own legal purpose, with its own raft of eligibility factors to consider. As applied, §6015(f) is not an avenue to liberally granted relief for requesting spouses who could qualify for traditional or allocated relief but for missing the two-year request period. In fact, §6015(f) expressly is intended to apply when the requesting spouse fails to qualify based on the merits of §6015(b) and §6015(c). For example, requesting spouses may fail to qualify for equitable relief because the requesting spouse has financial resources, which is a factor weighing against equitable relief. Or, the requesting spouse may satisfy the §6015(c) “actual” knowledge test regarding the erroneous item, but fall short on the highly subjective and seemingly all-embracing equitable test for “reason to know” of the erroneous item. There are many circumstances when §6015(f) would not offer a safe harbor to requesting spouses who would qualify for traditional or allocated relief if only they had applied in time.
In addition, §6015(f) as applied by the IRS often fails to serve requesting spouses. The Service simply gets the equitable analysis wrong. As recent examples, two applications for relief were rejected by the IRS Innocent Spouse unit because the requesting spouses failed to establish they suffered abuse. There is no basis in any of the guidance provided by the IRS or the courts to apply a requirement of abuse in order to obtain equitable relief. To the contrary, Revenue Procedure 2013-34 describing factors to consider when determining eligibility for §6015(f) relief expressly expanded the factual parameters pertaining to physical and emotional abuse to make relief more available in such circumstances. Unrepresented taxpayers confronted with incorrect administrative rejections may not have the wherewithal to rebut these determinations, including undertaking the next – potentially remedial but perhaps overwhelming – step of petitioning for Tax Court review.
As another collateral consequence, if the government brings an action to reduce to judgement joint liabilities against a taxpayer who may be eligible for innocent spouse relief after the two-year period for requesting relief, the taxpayer would be unable to defend based upon being an innocent spouse.
We could go on, and did go on during the DC Delegation meetings. We continue to monitor the Taxpayer First Act, with the hope that the legislation will be amended to extend the period of time to request §6015 relief for each of the three avenues to relief to be coterminous with the period of time to collect the tax. Doing so is only fair, and better serves Congress’s wish to put innocent spouses first, thus permitting the IRS to collect tax on erroneous items from the taxpayer responsible for them.
I have said it before, but since the 2006 amendments that allowed the Tax Court to review (f) requests in stand-alone (e) proceedings and barred collection activities (and tolled the 6502 SOL) while (f) relief is being considered, there is no longer any reason for (b)’s existence. I disagree with the authors that there are any situations where one would qualify under (b) currently in which you would not qualify for relief under (f) if (b) did not exist. After all, both (b) and (f) require the taxpayer to prove that it would be inequitable to hold the taxpayer liable. Bur, (b) relief has additional requirements that the taxpayer needs to show currently to qualify (e.g., no reasons to know and the two-year rule).
I agree with the idea of getting rid of the two-year rule for (c), though, if this is all that is done, it may have adverse consequences for those spouses who claim refunds (a not-insignificant number, in my experience). Currently, a spouse who might seek a refund can’t get one under (c), but can under (b) or (f). So, currently, any such taxpayer who applies after the two-year period under (b) or (c) has run, may be entitled to a refund under (f). (f) relief only applies if (b) or (c) does not. Focusing only on (c), by extending (c) relief to the full 6502 period, there would be some spouses who qualify for relief under (c), say, in the third year, who no longer could get refunds on equitable grounds because by qualifying for relief under (c), they can no longer qualify under (f). Perhaps it is also wise for this legislative fix to also make refunds under (c) allowable, as well.
That reasoning would call for removing a lot of other statutes of limitation. When a person proceeds pro se, sometimes it’s not because of not wanting a lawyer, but because of the needs that you describe. Even in states where LITCs are available, the first time some people hear about LITCs is when Tax Court sends an information page, and even then LITCs don’t always help. How many people knew about TIGTA’s reports before there were news articles in 2012, how many years does it take for people to learn what laws should apply, and how many LITCs will help with that kind of litigation? Statutes of limitation protect criminals.
Huh? An innocent person should not be granted relief because the innocent person can afford to be unjustly deprived of some of their property? This is equity?

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