The Internal Revenue Service (IRS) is not an agency that is liked by most. But when the IRS revises its rules to clearly benefit the taxpayers, one has to give the agency credit where credit is due. And credit is due, because two months ago, the IRS made a surprise but very welcome announcement.
With many married joint-filers, one spouse prepares the tax documents while the other spouse only signs on the dotted line. If any impropriety or tax evasion is discovered on a jointly-filed tax-return, both signers are technically in trouble with the feds.
The “innocent co-signer” spouse has long been allowed to plead ignorance of what he or she may have signed by submitting an ‘Innocent Spouse Relief’ application to the IRS, provided that the innocent spouse does so within a strict time period of two years.
However, in July, the IRS revoked the two-year limitation period and will now allow co-signing spouses to submit Innocent Spouse Relief requests without time limitations.
The IRS is also making the change in law retroactive. This means that joint-return taxpayers who have received denials to their Innocent Spouse Relief requests only because of the two-year limitation may now simply fill out an IRS Form 8857 within a certain number of years to obtain retroactive relief.
The revocation of the limitation period will also automatically be applied for taxpayers with in-suspense cases. This news is relevant to Massachusetts residents because, as one of the wealthiest and most populous states per capita, it is home to a significant number of joint-filers.
But while the innocent joint-filer spouse is excused by the IRS for not knowing what he or she signed, the spouse who prepared the erred tax return is still on the hook.
In situations where the filer made a genuine mistake that resulted in an audit or an unreasonable back-taxes claim, it is a good idea to promptly retain counsel specializing in tax law and rely on their advice and guidance for what to do next.
Source: The Boston, “IRS expands innocent spouse relief,” Jill Boynton, Aug. 24, 2011