Friday, January 8, 2016

New Innocent Spouse Proposed Regulations Issued

New Innocent Spouse Proposed Regulations Issued The IRS proposed regulations on innocent spouse relief under Code Sec. 6015 was just released on Wednesday, January 6, 2016 at Federal Register 134219-08. Of particular significance are the following: 1. Guidance is given on the application of res judicata in innocent spouse cases. Res judicata – as applied here - would prevent a spouse from seeking innocent spouse relief when such relief was at issue in a prior court proceeding or the requesting spouse meaningfully participated in a prior proceeding in which innocent spouse relief could have been raised. The proposed regulations provide guidance on “meaningful participation.” The proposed regulations provide a nonexclusive list of considerations in making a facts and circumstances determination of whether the requesting spouse “meaningfully” participated in such prior proceeding. Also, the Proposed Regulation exempts the application of the above rule if the requesting spouse establishes that he or she performed the acts due to abuse by the other spouse or the other spouse maintained control over the requesting spouse, and the requesting spouse did not challenge the other spouse because of fear of retaliation. 2. A definition of “underpayment or unpaid tax” as found in Code Sec. 6015(f) is provided. It states that “unpaid tax” and “underpayment” have the same meaning. Thus, the “underpayment” is the balance shown as due on the return less the amount of tax paid with the return on or before the due date for payment (without considering any extension of time to pay). The “unpaid tax” is calculated after applying any credits for withholding, estimated tax payments, payments made when requesting an extension, and other credits. 3. Guidance is given on credits and refunds in innocent spouse cases, explain how to determine the amounts of credits and refunds that may be available. The Proposed Regulations also provide for allocation of refunds in certain cases. 4. Clarification is provided for credits and refunds in equitable relief cases to make clear that credits and refunds of tax are available in deficiency cases as well as in underpayment cases.

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