Master Section 6015: Three Avenues for ‘Innocent’ Spouse Tax Relief

Married taxpayers filing jointly are both individually and jointly responsible for any income tax arising from their returns—even if they divorce later. But in certain situations—for example, where one spouse filed incorrect returns and the other was or was not aware of the problem—some equitable relief for joint tax reliability exists thanks to Section 6015.

IRS Section 6015 can provide spousal relief, but navigating the threshold requirements is not easy, says tax expert Daniel J. Pilla. Pilla, who outlines the IRS provision in his webinar for Eli Financial, “Innocent Spouse Relief Under Section 6015: Plan A, B, and C,” says it is particularly important to understand qualification categories, the statue of limitations, court considerations, and key definitions such as “knew or should have known.”

Section 6015: Three Types of Relief, But Three Qualification Categories

Relief from the IRS in this case falls under one of three categories for couples filing jointly, with a fourth for married filing separately. Two, parts (b) and (c) hinge on a deficiency in tax payments, while the third, (f) can be a deficiency or underpayment. The married filing separately relief can also be for a deficiency or underpayment.

Why three categories? When the law was written in 1998, Congress had three opinions about how to expand the original “innocent spouse” provision, note attorneys Eric L. Green and Carlton M. Smith. Instead of choosing one opinion, Congress kept all three. They are:

  • 6015(b): for joint returns with a deficiency; refunds are available but the taxpayers must establish they had no knowledge or reason to know and it would be “inequitable” to hold the electing spouse liable for the bad filing.
  • 6015(c): for joint returns with a deficiency or underpayment; refunds are not available but the IRS must establish that the taxpayer had actual knowledge of the deficient items and the couple must have been split for at least a year.
  • 6015(f): for joint returns, refunds are available for separate payments “made solely by the Requesting Spouse and for payments where the Requesting Spouse provided the funds for joint payments and knowledge is considered as an equitable factor.” In other words, this is for a spouse who knew about the deficiency but can prove hardship or lack of a significant benefit.

The married filing separately relief comes under a different statute, Section 66(c).

Limitations Push Defendants’ Attorneys Toward 6015(f)

According to Green and Smith, recent Tax Court rulings have rendered (b) and (c) unnecessary, leaving (f) as the go-to choice. Both (b) and (c), the court has ruled, have to be elected within a two-year period after the IRS starts collection activity, while (f) has an unlimited use window and can be raised at any time.

“This leads one to wonder why one would even to raise (b) relief anymore,” Green and Smith write. “Relief under (b) not only requires the taxpayer to prove all the factors going to inequity (the only issue under (f)), but also his or her lack of knowledge or reason to know of the item giving rise to the deficiency.”

The IRS rules for granting 6015 relief include a number of factors, notes tax lawyer Thomas. M. Regan. Rules issued back in 2012 say factors include:

  • Which spouse controlled the financial affairs
  • Whether hardship factors, including economic hardship, can be met
  • If abuse was present in the relationship
  • If the requesting spouse enjoyed “significant benefit” from the improper filing—i.e., a lavish lifestyle

Section 6015 is complicated, agrees Pilla in his webinar, but can offer significant benefits to the party which can successfully claim it. Make sure you are properly equipped with the latest intelligence before filing that claim.

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