(Bloomberg News) Spouses of accused tax cheats will get more time to file claims seeking to limit their liability under rules announced by the Internal Revenue Service.
The agency said today it is eliminating a two-year limit that has drawn criticism from members of Congress and taxpayer advocates.
"It opens up relief for a whole universe of people who weren't eligible for relief in the past," IRS Commissioner Douglas Shulman said in an interview. "We need to do the right thing with these taxpayers."
The old rules, adopted in 2002, required such claims to be filed within two years after the first attempt to collect. The agency gets about 50,000 innocent-spouse requests a year, and about 2,000 of those are rejected automatically because of the two-year rule.
When spouses are accused of cheating on taxes, their partners who sign joint returns share the responsibility to pay taxes and penalties to the government. The innocent-spouse rules allow partners to apply to avoid their share of those liabilities. The agency considers the applicants' financial situation, possible domestic violence history and knowledge of their spouse's tax and financial matters.
Effective Immediately
The new rule, effective immediately, applies to certain cases pending before the IRS or in court. Some taxpayers who were denied past requests for relief solely because of the two- year limitation for filing claims will also be able to get the IRS to reconsider their cases.
Certain taxpayers, including some who have already divorced or separated, still face the two-year limit to apply, according to the IRS.
In practice, the two-year rule available for the broadest form of innocent spouse relief didn't work because the taxpayers often were unaware that the IRS had started the collection process, National Taxpayer Advocate Nina Olson said in a statement. The advocate is an ombudsman at the IRS to assist taxpayers.
"This is a welcome occasion where everyone has emerged a winner," she said.