The Internal Revenue Service has changed their policy regarding those tax settlements dealing with a request for Innocent Spouse Relief. Originally there was a two year limit on the innocent spouse relief, but effective Monday, July 25, 2011, that has been eliminated.
The IRS initiated a review of the equitable relief provisions of the innocent spouse program earlier this year, and decided to make changes in both the policy and the program. Those changes will become fully operational this fall and additional guidance will be issued, according to the IRS. The IRS said it would no longer apply the two-year limit to new equitable relief requests or requests currently being considered by the agency, as of Monday, July 25, with respect to expanding the availability of equitable relief.
If the collection statute of limitations for the tax years involved has not expired, a taxpayer whose equitable relief request was previously denied solely due to the two-year limit may reapply using IRS Form 8857, Request for Innocent Spouse Relief.
The new rule will automatically be applied to taxpayers with cases currently in suspense and should not reapply. The two-year limit in any pending litigation involving equitable relief will not be applied, according to the IRS. The IRS said it would suspend its collection action under certain circumstances where the litigation is final.
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