The Lawletter Vol 38 No 6
The so-called "innocent spouse relief" provisions of the Internal Revenue Code provide that if, upon
taking into account all the facts and circumstances, it is inequitable to hold the other individual liable for the deficiency in tax for such taxable year attributable to [the] understatement [of one of the joint filers], . . . then the other individual shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent such liability is attributable to such understatement.
26 U.S.C. § 6015(b)(1)(D) (Westlaw current through P.L. 113‑13 approved 6‑3‑13) (paragraphing omitted). Section 6015 goes on to say that if relief is not available to the other individual under subsection (b) (or (c)), "the Secretary may relieve such individual of such liability." Id. § 6015(f).
Currently, there is some confusion as to which of two administrative rulings by the Internal Revenue Service ("IRS") should be applied when evaluating whether a taxpayer qualifies for equitable innocent spouse relief under § 6015(f): IRS Notice 2012‑8, 2012‑4 I.R.B. 309; or Rev. Proc. 2003‑61, 2003‑2 C.B. 296. Both of these rulings by the IRS describe in detail the procedures that must be followed and the standards that are to be applied in a case in which a taxpayer petitions the IRS for innocent spouse relief. However, according to at least three decisions by the U.S. Tax Court, the guidelines of Revenue Procedure 2003‑61 must be followed unless and until the recommended changes in the procedures and standards set forth in IRS Notice 2012‑8 are "finalized" via the issuance of a formal Revenue Procedure. Hudgins
v. Comm'r, T.C. Memo. 2012‑260, T.C.M. (RIA) ¶ 2012‑260, 2012 WL 3964890; Deihl v. Comm'r, T.C. Memo. 2012‑176, T.C.M. (RIA) ¶ 2012‑176, 2012 WL 2361518; Sriram v. Comm'r, T.C. Memo. 2012‑91, T.C.M. (RIA) ¶ 2012‑091, 2012 WL 1021315. Therefore, although IRS Notice 2012‑8 purportedly "superseded" Revenue Procedure 2003‑61, an attorney or accountant representing a taxpayer seeking innocent spouse relief under § 6015
is advised to consult with the IRS to make sure that both the client and the IRS are following the same guidelines and rules for determining whether the client is entitled to relief from joint and several liability under a jointly filed federal tax return.
A recent Chief Counsel Notice issued by the IRS provides insight as to what to expect when litigating a case involving a married taxpayer's claim for so-called "innocent spouse" relief from joint and several liability on a joint federal income tax return. In IRS Chief Counsel Notice
("C.C.N.") CC‑2013‑011 (June 7, 2013), the IRS provided Chief Counsel attorneys with guidance regarding the standard and scope of review that the Tax Court applies when reviewing requests for relief from joint and several liability under § 6015(f) and litigation guidance for cases that involve claims for relief under § 6015. C.C.N. CC‑2013‑011 points out to all IRS attorneys that a de novo standard of review is applied in innocent spouse relief cases that are argued before the Tax Court:
In all section 6015(f) cases, the scope of review is de novo as provided in Porter v. Commissioner, 130 T.C. 115 (2008), and the standard of review is de novo as provided in Porter v. Commissioner, 132 T.C. 203 (2009). Chief Counsel attorneys should no longer argue that the Tax Court should review the Service's section 6015(f) determinations for abuse of discretion or that the court should limit its review to evidence in the administrative record. Although Chief Counsel attorneys are no longer required to preserve the standard and scope of review issues for appeal, they should continue to work with petitioners to stipulate to evidence in the administrative record that is relevant to the court's determination regarding section 6015 relief.
In sum, apart from the statutes, regulations, and case law that deal with innocent spouse relief from liability for federal tax, an attorney or accountant who advises a married taxpayer seeking relief from joint and several liability under a joint federal tax return should consult IRS Notice 2012‑8, Revenue Procedure 2003-61, and C.C.N. CC‑2013‑011 in order to know what to expect when arguing his or her client's case before the IRS or a court.