The Internal Revenue Service (IRS) is giving some relief to an "innocent spouse" who otherwise may have been liable for a partner's back tax debt.
- The IRS will no longer apply the two-year limit to new equitable relief requests or requests currently being considered by the agency.
- 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, if the collection statute of limitations for the tax years involved has not expired. Taxpayers with cases currently in suspense will be automatically afforded the new rule and should not reapply.
- The IRS will not apply the two-year limit in any pending litigation involving equitable relief, and where litigation is final, the agency will suspend collection action under certain circumstances.
- The change to the two-year limit is effective immediately, and details are in Notice 2011-70, posted today on IRS.gov.
An Offer in Compromise is based on a formula that takes into account a taxpayers ability to pay back a tax debt. If you cannot pay the IRS and it doesn't appear that your financial position is going to change "any time soon", the fastest way to a fresh start most likely will be through an Offer in Compromise.
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