4th Circuit Says 2 Year Limit on Innocent Spouse Relief Claim

By Tanya Roth, Esq. on June 16, 2011 | Last updated on March 21, 2019

The U.S. Court of Appeals for the Fourth Circuit reversed a Tax Court opinion that set a two-year statute of limitations on innocent spouse relief claims, reports the Journal of Accountancy.

For all you non-tax lawyers out there, let's put it in plain English. The Tax Court was overruled by the Fourth Circuit on a statute of limitations issue.

Easy enough?

Treasury Regulations are how tax lawyers understand the provisions of the Tax Code. And this particular Treas. Reg. said that there was a two-year statute of limitations to bring a claim for innocent spouse relief.

What's innocent spouse relief, you ask? In simplest terms, imagine your client is married to someone who has tax issues and has a liability assessed against them. If they file jointly, the spouse is liable too. Innocent spouse relief is a remedy sought by a spouse to relieve himself or herself of that liability.

The case here, Jones v. Commissioner, is not a case that really disputes the concept of whether or not the spouse was entitled to the relief. The issue is really one that addresses whether or not the wife, Octavia Jones, was able to bring the claim at all.

But the problem with the Tax Code and tax rules is that they just aren't user-friendly. So while innocent spouse relief is governed by Section 6015 of the Code, the application of it is regulated in the Treas. Regs. -- keep in mind that there are three subsections of 6015.

The IRS argued that the two year statute of limitations did not apply to the type of innocent spouse relief she was seeking, namely, relief under subsection (f) of 6015. This essentially became a question of statutory reading and congressional intent.

The Fourth Circuit looked at congressional intent and concluded that while the Tax Code section itself is ambiguous as to the statute of limitations, the two-year statute of limitations was a permissible interpretation of the statute.

Interestingly, the statute of limitations was brought up before the Senate Finance Committee last April, where the IRS Commissioner was asked to review the statute, due to the fact that it "serves to deny equitable relief to the very taxpayers the law was designed to reach."

A final sidebar. An interesting book regarding the consequences faced by a so-called "innocent spouse" has come out, and may make for compelling reading both for tax attorneys and civilians. To dig deeper into the issue take a look at Innocent Spouse.

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