Filing returns jointly for any married couple comes with a range of advantages including entitlements to various tax breaks. Therefore, most married couples prefer filing tax returns jointly to maximize on such benefits. However, whenever a couple files returns jointly, they are individually liable to all the information and obligations associated to the returns. In this case, any omissions or erroneous entries are liable to both spouses irrespective of their knowledge or involvement with such information. However, the IRS provides an opportunity for innocent spouses to be protected from any tax liabilities if they were ignorant of the tax situation that led to the additional tax liabilities or signed returns out of pressure or extreme influence. Therefore, such an innocent spouse can petition to the IRS to be excused from any liabilities and thereby, pass the whole additional tax liability to the guilty spouse. This spouse-protection-arrangement is referred to as the Innocent Spouse Relief.
The Innocent Spouse Relief has protected many victims of tax fraud who find themselves in a problematic tax situation for information they were not aware of only because they filed their taxes jointly. However, to qualify for the Innocent Spouse Relief, one needs to meet a set of rules provided by the IRS. One of these rules is that you need to file for the Innocent Spouse Relief within a maximum of 2 years after submitting the returns. It means that if the IRS contacts a couple after the 2 year limit, an innocent spouse cannot utilize the Innocent Spouse Relief.
The two year limit on the Innocent Spouse Relief has been faced with a lot of criticism because this time limit provided by the IRS is seen as arbitrary and lacking any basis. There have been various efforts by different parties to seek a repeal of the limitation on the relief. The point of contention is that a spouse could remain innocent even 3 to 5 years after returns are made, and holding such an innocent spouse liable because of a time limitation is simply unfair. In one case, the IRS attempted to recover taxes from a spouse whose husband had been convicted of physically abusing her. The IRS claimed that it could not apply the Innocent Spouse Relief because of the time limitation. Luckily for her, the court ruled in her favor and the decision of the IRS to hold her responsible was reversed.
Various lawmakers, including 49 Representatives and 3 Senators, have endeavored to get an adjustment of the “2 year” rule. Representatives Pete Stark of California and Jim McDermott of Washington have written to the IRS Commissioner Doug Shulman, seeking an adjustment to the rule. Others including Senator Max Baucus, Senator Tom Harkin, and Senator Sherrod Brown have also made similar appeals to IRS administrators. However, this spirited effort has not been in vain. The IRS Commissioner, in response to these letters indicated, stated that the IRS was in the process of overhauling the whole relief to ensure that it addressed their concerns and ensured fairness to the innocent spouse.