Tax Brake with Robert G. Nath, Esq.
"Innocent Spouses Get a Tax Court Break"
- Week of 6/17/02 -
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| The recently liberalized “innocent spouse” rules contain a number of traps that can result in no relief for many. But a case from the Tax Court now holds that even if a wife filed jointly with her husband, and there was no “deficiency,” she can apply for innocent spouse relief. This is an important case because it allows for IRS and court jurisdiction to help out in many cases. The case is Ewing v. Commissioner.
In this case, the wife filed a joint return and the couple reported taxes due. Under the innocent spouse rules, a wife (or husband) can get relief only if there is a “deficiency,” meaning an amount of tax that should have been reported on the return, but was not. Example: The IRS audits a return and finds more tax due. Even under the “separation of liability” election, relief is available only for a “deficiency.” But a third type of “innocent spouse” relief is the “equitable relief” that is now part of the tax law. The IRS opposed relief here for Mrs. Ewing on grounds there was no deficiency. So she brought the case to US Tax Court and won the right to have her facts considered. The Court said that the law did not show Congress intended to confine the Court's authority to deficiency situations. This ruling means that innocent spouses can apply for relief even where they sign joint returns reporting a set amount due. The IRS would be required to consider these cases under “equitable” standards. Those cases remain difficult to prove, and the IRS has shown reluctance to grant wholesale relief. Still, the effort may be worth it in many cases. |
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