The Four Primary Factors for § 6015(b) Innocent Spouse Relief
There are different kinds of innocent spouse relief. Each kind has its own unique advantages and disadvantages as well as requirements for claiming it. The first kind of innocent spouse relief is § 6015(b). This is commonly referred to as “traditional innocent spouse relief.” The requirements of § 6015 are stated in § 6015(b)(1) where the code states that for relief to be granted the requesting spouse’s partner must have:
1.) Understated an income tax liability on a joint return signed by the requesting spouse
2.) Understated an income tax liability attributable to themselves and not the requesting spouse
In addition, the requesting spouse must
3.) Not know or have reason to know that the return contained an understatement of tax
4.) Make the claim within two years after the date the IRS began collection activity
Lastly, the requesting spouse must prove that:
5.) Considering all the facts and circumstances, it is inequitable to hold the requesting spouse liable for the understatement of tax
How Reason to Know(#3) and IRS Collection Activity(#4) are Determined
To determine if the requesting did not know or have reason to know (#s 3 & 4) the court will generally ask
6.) Whether the requesting spouse knew the income item was omitted
7.) Whether the requesting spouse met their “duty of inquiry”
8.) Whether the spouse actively attempted to conceal the item from the requesting spouse
How 6, 7, and 8 are determined
To determine 6, 7, and 8 the court will usually consider if a reasonably prudent person would also have missed the omission. Assuming, that hypothetical person was exposed to the same level of:
10.) Involvement in the business or transactions related to the understatement
11.) Level of spousal deceit
12.) Expenditures for lavish purchases
How the Inequitable Factor is Determined
To determine if it would be inequitable (#5) there are two factors generally considered.
13.) Did the Requesting Spouse receive a significant benefit?
14.) Did the requesting spouse engage in any wrongdoing?
To determine if the requesting spouse received a significant benefit (# 13) the following is generally asked:
15.) Did the requesting spouse receive a benefit from the refund above and beyond normal support?
How Do All These Factors Fit Together?
To be able to claim relief under § 6015(b) the requesting spouse must meet all four requirements. There is no weighing of each factor as there is in § 6015(f) equitable relief determinations. Each factor is a bright line test and failure to meet any of them is grounds for disqualifying a claim under § 6015(b).
Important Planning Considerations
It is also important to note that since § 6015(b) only relieves a requesting spouse of liabilities related to the non-requesting spouse’s income a requesting spouse may still owe the IRS after a successful §6015(b) claim. Care must be taken that a requesting spouse’s full tax situation is understood before filing a § 6015(b) claim. The reason for this is that further claims may be denied under the authority of CFR 1.6015-1(h)(5.) CFR 1.6015-1(h)(5) grants the authority to deny second claims that are not materially different from a prior claim. By not requesting all forms of prudent and available relief in the first claim the requesting spouse may lose their ability to claim them in the future.
For these reasons, while § 6015(b) is “traditional” relief it is often harder to receive and provides fewer benefits than other forms of relief. However, the tests for §6015(b) innocent spouse relief are mechanical in nature. This means that if the requesting spouse does meet the strict guidelines set forth under § 6015(b) it can be an excellent relief option.