Page 67 - Family Law Services

• The taxpayer establishes that, taking into account all the facts and circumstances, it would be un-
fair to hold them liable for the understated or underpaid tax.

• The taxpayer and spouse (or former spouse) did not transfer assets to one another as a part of a
fraudulent scheme, defined subsequently.

• The spouse (or former spouse) did not transfer property to the taxpayer for the main purpose of
avoiding tax or the payment of tax.

• The taxpayer did not file or fail to file his or her return with the intent to commit fraud.

• The income tax liability from which the requesting taxpayer seeks relief must be attributable to
an item of the spouse (or former spouse) with whom the taxpayer filed the joint return, subject to
certain exceptions.

The IRS will consider all facts and circumstances to determine whether it is unfair to hold the taxpayer
responsible for the understated or underpaid tax.

Pending guidance. IRS Notice 2012-8 proposes a new revenue procedure that would update Revenue
Procedure 2003-61, 2003-2 C.B. 296, which provides guidance regarding equitable relief from income
tax liability under Sections 66(c) and 6015(f) of the IRC. Since the issuance of Revenue Procedure
2003-61 in August 2003, the IRS’s experience with working Section 6015(f) equitable relief cases has
grown significantly. This proposed update addresses the criteria used for making innocent spouse relief
determinations under Section 6015(f) equitable relief cases and revises the factors for granting equitable
relief. The factors have been revised to ensure requests for innocent spouse relief are granted under Sec-
tion 6015(f) when the facts and circumstances warrant and that requests are granted in the initial stage of
the administrative process, when appropriate.

Fraud. Relief will not be granted if the IRS proves that the taxpayer and spouse (or former spouse)
transferred property to one another as part of a fraudulent scheme. A fraudulent scheme includes a
scheme to defraud the IRS or third party, such as a creditor, former spouse, or business partner.

When to file for relief. In 2011 (see Internal Revenue Bulletin Notices 2011-70 and 2011-32), the IRS
abandoned the two-year limitation period for equitable relief requests under IRC Section 6015(f). In-
stead, taxpayers can request relief within the applicable statute of limitations period

• for the IRS to collect the tax, 10 years after assessment or

• for taxpayers to request a credit or refund of tax, the later of 3 years after the return was filed or 2
years after the tax was paid.

Any notice indicating the IRS intends to collect a joint liability from a spouse (or former spouse) or any
notice indicating the IRS intends to apply a garnishment or subsequent refund to a prior joint liability
may be considered collection activity and should be reviewed.

Contingent Tax Liabilities

One of the concerns that exist among divorcing couples is the division of all known liabilities. Unfortu-
nately, one of the liabilities that cannot be predicted or foreseen is a change in the couple’s income tax

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