The Internal Revenue Service Expands the Time Period to Request Equitable Relief

On July 25, 2011, the IRS issued Notice 2011-70 to announce its expansion of the period within which individuals may request equitable relief from joint and several liability tax liabilities.

Section 6015(f) provides for equitable relief when an individual cannot meet the conditions of the innocent spouse rule (IRC Sec. 6015 (b)) or separation of liability relief (IRC Sec. 6015 (c)).  When relief is not available under the innocent spouse rule or separation of liability relief provision, IRC Sec. 6015 (f) authorizes the IRS to grant equitable relief if, taking into account the facts and circumstances, it would be inequitable to hold a requesting spouse liable for any unpaid tax or deficiency.

In the past the request had to be made within 2 years of the first debt collection notice.  Now, taxpayers no longer have to request equitable relief within two years of the IRS’s first collection activity against the requesting spouse.  Moreover, 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. Taxpayers with cases currently in suspense will be automatically afforded the new rule and should not reapply.  Also, 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.

Notice 2011-70 does not apply to requests for regular innocent spouse relief or separation of liability relief; consequently, the 2-year period will continue to apply.

 

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