In a complete reversal of its position, the IRS announced that it will eliminate the two- year limit it imposed on “equitable” innocent spouse claims. The IRS took the unusual action after a number of embarrassing losses in the Tax Court and under heavy pressure from Congress, including Republican presidential candidate Rep. Michele Bachmann, R-Minn. Innocent spouse relief is designed to help a taxpayer who did not know that his or her spouse understated or underpaid an income tax liability on a joint return.
Under regular innocent spouse relief, spouses must petition for status as an innocent spouse within two years of when the IRS first tries to collect. The equitable provisions, added later, allow a spouse to apply for innocent spouse status when the spouse does not qualify for regular relief but it would be inequitable to hold the spouse liable. Congress did not put a two-year limitation on equitable relief, but the IRS wrote regulations with the two-year time limit. Equitable innocent spouse relief is frequently sought in situations of spousal abuse.
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