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, disadvantages, and requirements for claiming it. The first kind of innocent spouse relief is § 6015(b), commonly referred to as “traditional innocent spouse relief.” The requirements of § 6015 are stated in § 6015(b)(1).
The code states that for relief to be granted the requesting spouse’s partner must:
- Understate an income tax liability on a joint return signed by the requesting spouse.
- Understate an income tax liability attributable to themselves, not the requesting spouse.
In addition, the requesting spouse must:
- Not know or have reason to know that the return contained an understatement of tax.
- Make the claim within two years after the date the IRS began collection activity.
Lastly, the requesting spouse must prove that:
- Considering all the facts and circumstances, it is inequitable to hold the requesting spouse liable for the understatement of tax.
How Reason to Know & IRS Collection Activity are Determined
To determine if the requesting did not know or have reason to know, the court generally asks:
- If the requesting spouse knew the income item was omitted.
- If the requesting spouse met their “duty of inquiry.”
- Whether the spouse actively attempted to conceal the item from the requesting spouse.
How These are Determined
To determine the above, the court usually considers if a reasonably prudent person would also have missed the omission.
Assuming, that hypothetical person was exposed to the same level of:
- Education
- Involvement in the business or transactions related to the understatement
- Level of spousal deceit
- Expenditures for lavish purchases
How the Inequitable Factor is Determined
To determine if it would be inequitable, there are two factors generally considered.
- Did the Requesting Spouse receive a significant benefit?
- Did the requesting spouse engage in any wrongdoing?
To determine if the requesting spouse received a significant benefit, they usually ask if the requesting spouse received a benefit from the refund above and beyond normal support.
How Do All These Factors Fit Together?
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. 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 not materially different from a prior claim. By not requesting all forms of prudent, available relief in the first claim, the requesting spouse may lose their ability to claim them in the future.
Closing Thoughts
While § 6015(b) is “traditional” relief, it is often harder to receive. It 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.
