Tuesday, August 9, 2011
New Rule for Innocent Spouse Relief
On July 26, 20110 the Internal Revenue Service announced that it will extend help to more innocent spouses by eliminating the two-year time limit that now applies to certain relief requests. After a thorough review:
• The IRS will no longer apply the two-year limit to new equitable relief requests or requests currently being considered by the agency.
• A taxpayer, whose equitable relief request was previously denied solely due to the two-year limit, may reapply using IRS Form 8857, Request for Innocent Spouse Relief, if the collection statute of limitations for the tax years involved has not expired.
The IRS will not apply the two-year limit in any pending litigation involving equitable relief, and where litigation is final, the agency will suspend collection action under certain circumstances.
The change to the two-year limit is effective immediately, and details are in Notice 2011-70, posted on IRS.gov. This policy change will become operational in the fall and more guidance will be forthcoming