For Better or for Worse: Res Judicata and Innocent Spouse Relief

Rodgers v. commishThe Internal Revenue Code authorizes a married couple to file a joint tax return. I.R.C. § 6013(a) (“A husband and wife may make a single return jointly of income taxes . . . .”). The option is popular as it frequently yields some modest tax savings. But a joint return has another consequence that is often overlooked; “if a joint return is made, . . . the liability with respect to the tax shall be joint and several.” I.R.C. § 6013(d)(3). Consequently, one spouse can be liable for the tax due when the other spouse understates income or overstates deductions.

The Code does provide some prospect for relief from joint and several liability for an “innocent spouse.” See I.R.C.… Read More

A Second Bite at the Apple-Can You Ask for Innocent Spouse Relief Twice?

Section 6015 of the Internal Revenue Code provides three different forms of innocent spouse relief, which permit a qualified taxpayer to limit his liability for taxes due under a joint return. While innocent spouse relief can be a terrific remedy, many taxpayers attempt to proceed on their own, which is often a mistake due to the complexity of the relevant standards. Frequently, taxpayers fail to present sufficient evidence, or they only apply under one of the three operative standards.

Making matters worse, successive applications are generally barred by the Treasury Regulations, which provide that a taxpayer seeking relief under Section 6015 is entitled to “only one final administrative determination of relief.” Treas.Read More

The Tax Court Holds that An Innocent Spouse May Recover a Refund Following an IRS Levy on Joint Property.

When a taxpayer applies for innocent spouse relief, the IRS cannot levy against the taxpayer’s property while the administrative request is pending or while review of the determination on that request is pending in Tax Court. I.R.C. § 6015(e)(1)(B)(i). The IRS can levy against joint accounts, however, if state law provides that each joint holder has an unconditional right to withdraw the entire amount on deposit. United States v. Nat’l Bank of Commerce, 472 U.S. 713, 722-23 (1985).

What happens when the IRS levies against a joint bank account in which a taxpayer with a pending request for innocent spouse relief has an interest?Read More