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Proposed Regulations Provide More Detailed Rules Governing Innocent Spouse Relief

  • December 9, 2015 by hamiltontharp
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The IRS recently proposed several significant changes to the existing regulations under Section 6015 of the Internal Revenue Code. The regulations in Section 6015 provide guidance to married individuals who filed joint returns and later sought relief from joint and several liability.

There are several proposed regulation changes:

  • Present additional guidance on the application of Section 6015(g)(2) res judicata, a doctrine that aims to prevent a spouse from requesting innocent spouse relief when Section 6015 relief was at issue in a prior court proceeding. The proposed rule entails defining precisely what “meaningful” participation entails.
  • Give a better definition for “underpayment” and “unpaid tax” under Section 6015(f). Clarity is needed. Currently, the terms are too similar which is problematic; because if there is no unpaid tax due, no relief is available.
  • Give detailed rules regarding credits and refunds. The rules explain, in detail, how a credit or refund available to a spouse is determined and allocated.
  • Amend the rule for credit or refund in equitable relief cases to clarify that credits or refunds of tax are available in both underpayment and deficiency cases.
  • Elaborate on the rule that penalties and interest are not separate items from which relief can be obtained in underpayment cases.
  • Introduce an administrative rule. The attribution of an inaccurate item follows the attribution of the underlying item that caused the increase to adjusted gross income. The administrative rule includes a tax benefit rule, where the inaccurate item allocated to a requesting spouse may be increased or decreased. The adjustment depends on the tax benefit to each spouse.
  • Revise rules governing the prohibition on collection and suspension of the collection statute. The proposed revisions are in response to the amendments of the law permitting the Tax Court to review innocent spouse cases where the IRS has not determined a deficiency.

The proposed rules are not applicable until they are published in the Federal Register. At that time, they will be considered final. If you would like more information about the proposed regulations, please contact one of our professionals today.

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