New Federal Innocent Spouse Rules: State Tax Implications

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Section 6015 liberalized the original innocent spouse rules and added 2 new avenues for claiming relief from joint and several tax liability. The 3 methods now available under Section 6015 are: 1. innocent spouse relief, 2. separate liability election, and 3. equitable relief. Since the enactment of Section 6015, several states have adopted the federal provisions for determining when similar relief will be granted at the state level. Other states have adopted modified versions, while still others have developed their own innocent spouse rules. For the IRS to consider granting a request for innocent spouse relief, 5 conditions must be met, including the requirement that the requesting spouse not only did not know but also had no reason to know of the erroneous item. A 2nd alternative for escaping joint and several liability on a jointly filed tax return is for a spouse to elect to allocate the deficiency based on each spouse's share, on a separate-return basis, of the items taken into account in computing the deficiency. The IRS may grant relief from joint and several tax liability when the requesting spouse does not qualify under Section 6015(b) or (c) and the IRS determines that it would be inequitable to hold the requesting spouse liable for the joint tax liability. Section 6015(a) specifically excluded consideration of community property laws in determining the applicability of relief from joint and several liability.

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