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IRS Eases Requirements for Innocent-Spouse Status

July 26, 2011 (USA TODAY) The IRS said Monday that it will make it easier for some taxpayers who were unaware of their spouse's tax misdeeds to seek innocent-spouse relief.

The "innocent-spouse rule" allows taxpayers to seek relief from their spouse's tax debts, even if they signed a joint return. In the past, the IRS has required taxpayers to file for relief within two years after a collection notice. The deadline has prevented taxpayers in the dark about their spouse's tax debts from seeking relief, the IRS taxpayer advocate and legal aide attorneys said.

On Monday, IRS Commissioner Douglas Shulman said the IRS is eliminating the deadline for taxpayers who seek innocent-spouse status under the "equitable relief" provision. This type of relief is often sought by taxpayers who were victims of domestic abuse, the IRS said. "When people are in tough circumstances, we need to be willing to work with them," Shulman said.

The rule change will apply to cases that are pending before the IRS, Shulman said. Taxpayers whose applications for relief were rejected because of the two-year deadline can reapply, he said. "We're being as flexible as we can."

Obtaining innocent-spouse relief is difficult, even for taxpayers who file on time. The IRS receives more than 50,000 innocent-spouse applications a year and grants fewer than half. About 2,000 requests are denied each year because of the two-year deadline, according to the IRS.

To obtain innocent-spouse relief, taxpayers must prove to the IRS that they didn't know, or have reason to know, that their spouse underpaid income taxes. The IRS will also consider factors such as the taxpayer's education and the couple's financial situation.

Rep. Pete Stark, D-Calif., said the rule change removes "an arbitrary obstacle for innocent spouses, primarily women, and helps us move toward a more equitable tax system."

IRS Taxpayer Advocate Nina Olson called the rule change "a welcome occasion where everybody has emerged a winner."

Copyright 2011 USA TODAY, a division of Gannett Co. Inc.

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