Source: http://www.mclaughlinlegal.com/practice-areas/tax-controversy-and-litigation/innocent-spouse/
Timestamp: 2017-08-23 11:39:58
Document Index: 369007849

Matched Legal Cases: ['§ 6015', '§ 6013', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015', '§ 6015']

San Diego Innocent Spouse Relief - McLaughlin LegalMcLaughlin Legal
When married taxpayers file joint returns, they become joint and severally liable for the whole tax liability. This means that each spouse, husband or wife, is individually responsible for the accuracy of the entire tax return and the payment of the tax; however, the law may provide an opportunity from relief within IRC § 6015 and the rules related to "Innocent Spouse." more
Home Innocent Spouse
Because married taxpayers may elect to file joint returns with their spouses under IRC § 6013(a), they become joint and severally liable with respect to the income tax liability. This means that each spouse, husband or wife, is individually responsible for the accuracy of the entire tax return and the payment of the tax. Because some issues may arise to which one spouse was previously unaware, the innocent spouse provisions provide an opportunity from relief.
History and Background of Innocent Spouse Relief
In prior versions of the of the Internal Revenue Code, a spouse claiming innocent spouse relief had to show that (1) there was an understatement on the return attributable to the other spouse that was “grossly erroneous,” (2) the spouse seeking relief did not know, or have reason to know of the understatement, and (3) it would be inequitable to hold her liable. There were also certain dollar limitations and innocent spouse relief was generally an “all or nothing.” With the passing of the IRS Restructuring and Reform Act of 1998, innocent spouse relief and IRC § 6015 was greatly enhanced.
Today, IRC § 6015 provides that:
Notwithstanding section 6013 (d)(3)—
For purposes of this subsection, the term “understatement” has the meaning given to such term by section 6662 (d)(2)(A).
(i) In general An individual shall only be eligible to elect the application of this subsection if—
(ii) Certain taxpayers ineligible to elect If the Secretary demonstrates that assets were transferred between individuals filing a joint return as part of a fraudulent scheme by such individuals, an election under this subsection by either individual shall be invalid (and section 6013 (d)(3) shall apply to the joint return).
(i) In general The term “disqualified asset” means any property or right to property transferred to an individual making the election under this subsection with respect to a joint return by the other individual filing such joint return if the principal purpose of the transfer was the avoidance of tax or payment of tax.
(I) In general For purposes of clause (i), except as provided in subclause (II), any transfer which is made after the date which is 1 year before the date on which the first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals is sent shall be presumed to have as its principal purpose the avoidance of tax or payment of tax.
(II) Exceptions Subclause (I) shall not apply to any transfer pursuant to a decree of divorce or separate maintenance or a written instrument incident to such a decree or to any transfer which an individual establishes did not have as its principal purpose the avoidance of tax or payment of tax.
(i) In general Except as otherwise provided in section 6851 or 6861, no levy or proceeding in court shall be made, begun, or prosecuted against the individual making an election under subsection (b) or (c) or requesting equitable relief under subsection (f) for collection of any assessment to which such election or request relates until the close of the 90th day referred to in subparagraph (A)(ii), or, if a petition has been filed with the Tax Court under subparagraph (A), until the decision of the Tax Court has become final. Rules similar to the rules of section 7485 shall apply with respect to the collection of such assessment.
(ii) Authority to enjoin collection actions Notwithstanding the provisions of section 7421 (a), the beginning of such levy or proceeding during the time the prohibition under clause (i) is in force may be enjoined by a proceeding in the proper court, including the Tax Court. The Tax Court shall have no jurisdiction under this subparagraph to enjoin any action or proceeding unless a timely petition has been filed under subparagraph (A) and then only in respect of the amount of the assessment to which the election under subsection (b) or (c) relates or to which the request under subsection (f) relates.
Except as provided in paragraphs (2) and (3), notwithstanding any other law or rule of law (other than section 6511, 6512 (b), 7121, or 7122), credit or refund shall be allowed or made to the extent attributable to the application of this section.
A misconception of innocent spouse relief is that it is only one issue; however, innocent spouse relief encompasses 3 types of relief: (1) innocent spouse relief, (2) separation of liability, and (3) equitable relief.
6015(b) - Innocent Spouse Relief6015(c) - Separation of Liability6015(f) - Equitable Relief
IRC § 6015(b) is available relief to all qualified joint filers. In fact, many who first think of innocent spouse relief are referring to IRC § 6015(b) relief. To qualify for 6015(b) innocent spouse relief, there must have been a joint tax return, with an understatement of tax attributable to a deficiency. This generally means there must have been an audit of the return, and not just a failure to pay the amount shown on the original return. Refunds are available, but the requesting spouse must establish that they did not know, or have reason to know of the mistake(s) on the return. For purposes of innocent spouse relief, “reason to know” generally means what a reasonably prudent taxpayer could be expected to know under similar situations (Price v. CIR).
Some of the elements the IRS will look at in determining innocent spouse relief and any “reason to know” include the requesting spouse’s:
involvement in family business and financial affairs;
lavish or unusual expenditures, standard of living; and
evasiveness and deceit of nonrequesting spouse.
In some situations there may also be a duty to inquire if the requesting spouse knows enough facts to put them on notice that an understatement exits. Innocent spouse relief also requires a finding that it is inequitable to hold the taxpayer liable, considering all facts and circumstances.
In addition to the traditional innocent spouse relief of § 6015(b), there is a provision to separate the liability of two spouses to a joint return. Although this does not completely relieve the requesting spouse of all obligations, it apportions the liability consistent with which spouse was responsible for the respective items on the original return.
To qualify, a requesting spouse must show a joint return was filed that resulted in a deficiency (again, something more than just a failure to pay the amount show on the return), and they are divorced, widowed, legally separated, or not living together for at least 12 months prior to the election of § 6015(c) relief. Unlike innocent spouse relief under § 6015(b), the IRS must establish that the requesting spouse had actual knowledge of the deficiency items for § 6015(c) relief; however, no refunds are available under § 6015(c) relief.
If a requesting spouse is not eligible for innocent spouse relief under § 6015(b) or § 6015(c), there is still a possibility for some relief under the § 6015(f) equitable relief provisions. If a joint return was filed, no other innocent spouse relief is available, the applicable statute of limitations has not expired, there has been no transfer of assets as part of fraudulent scheme or which are otherwise disqualified, and the liability is attributable to the non-requesting spouse, relief may be granted. The IRS will further look to various equitable facts and circumstances, including whether an economic hardship will be created if no relief is granted, the legal obligation of the non-requesting spouse, i.e., divorce agreement, if a significant benefit from the mistake existed, the requesting spouse’s compliance with income tax laws, and the existence of any abuse.
It is important for requesting spouses to understand the requesting innocent spouse relief is an “election,” and must be done timely and through the correct procedures. To file an election for innocent spouse relief, taxpayers generally file Form 8857, Request for Innocent Spouse Relief (or a similar statement containing the same information signed under penalties of perjury). Generally speaking, taxpayers seeking innocent spouse relief under IRC § 6015(b) and IRC § 6015(c) must file a request no later than 2 years from the first collection activity occurring after July 22, 1998, against the requesting spouse. For innocent spouse claims filed under IRC § 6015(f), the claim is generally timely as long as the refund statute or collection statute is open.
The tax attorneys at McLaughlin Legal are qualified and experienced in all types of tax law matters, including those of innocent spouse claims. Our firm is not all things to all clients, but with McLaughlin Legal‘s specialization, personalized services, and commitment to protecting your rights, we can offer the same level of service as any other law firm. Whether defending your rights during an IRS audit, before the U.S. Tax Court, or claiming and defending an innocent spouse claim, you can be confident in our concentrated are of the law. Together we can work together to resolve your tax dispute.
If you are interested in learning more about innocent spouse relief, please feel free to contact us today for a free consultation.