Most people I talk to about their IRS problem have already built the worst-case scenario in their head. The reality is usually much more manageable. I'm Darrin Mish, and I've been representing taxpayers before the IRS for 32 years. Here's what actually tends to happen.
When a marriage goes awry and ends up in divorce, it is not uncommon for a spouse to be jointly liable for the outstanding taxes of the couple. This is especially true in cases of domestic abuse where the innocent spouse does not have access to tax records and is therefore unaware that any taxes are unpaid. But although the IRS has what is known as the ‘innocent spouse’ rule where such a spouse is not held liable for the unsettled taxes, there is a condition to be met. The innocent spouse has to apply for the relief within 2 years from the time the IRS sends a notice for payment.
Many a spouse has missed the deadline due to various reasons but the IRS has been adamant in going after the unpaid taxes regardless of these reasons. This refusal has sparked a flurry of protests from various quarters like the National Taxpayer Advocate, legal aid attorneys and lawmakers from both sides of the political divide.
In April, Michele Bachmann (R-Minnesota), a Republican presidential candidate and former federal tax attorney, introduced legislation in the House to revoke the time limit for innocent-spouse relief. At the same time, Democrats Pete Stark (D-California), and Jim McDermott (D-Washington), sent a letter signed by all 48 Democrats including those in the House Ways and Means Committee, to the IRS asking it to cancel the two-year rule. The House Ways and Means Committee has jurisdiction over tax issues. In addition, Senate Finance Committee Chairman Max Baucus (D-Mont.) has also called on the IRS to evaluate the rule.
There are many reasons why the two-year deadline can easily be missed.
Some innocent spouses are ignorant of the tax situation because their spouses hide the tax records. Others are not aware that the 2 year time limit begins when a refund offset is given. A refund offset is where the IRS takes what you owe in taxes out of your refund.
One prime reason for innocent spouses missing the deadline is domestic violence. A battered wife is not able to ask information about the taxes from an abusive husband.
Another reason is divorce, which does not automatically annul a spouse’s joint tax liabilities. When a couple divorces, often records are kept by one spouse and the innocent spouse is unaware of the actual tax situation.
In cases of fraud where the guilty spouse is imprisoned while owing the IRS money, the innocent spouse is often unaware of the outstanding taxes until the two-year time bar has elapsed.
And finally, when the guilty spouse has died, the innocent spouse may not be able to meet the deadline due to emotional and circumstantial reasons.
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