Administrative appeal rights in innocent spouse cases.

Under Sec. 6013 (d) (3), married taxpayers filing jointly are jointly and severally liable for tax. In certain circumstances, Sec. 6015 provides innocent spouse relief from liability on request, as well as various administrative appeal rights to the requesting spouse. In Rev. Proc. 2003-19, the IRS has now granted some of these rights to nonrequesting spouses whose spouses of former spouses sought innocent spouse relief from joint and several liability under Sec. 6015.

Prior to Rev. Proc. 2003-19, the Service had given only the spouse requesting relief the right to file a written protest and receive an administrative conference with the IRS's Office of Appeals (Appeals) for a determination. The new procedure allows the nonrequesting spouse the right to file a written protest and have an Appeals conference on a decision that granted partial or full innocent spouse relief to the requesting spouse. In most cases, the nonrequesting spouse will protest a decision granting relief to the requesting spouse, but cannot appeal the decision to the Tax Court, under Rev. Proc. 2003-19. Sec. 6015(e) (1) (A) gives that right only to the requesting spouse. Thus, the nonrequesting spouse generally has no recourse once the Service makes a final innocent spouse determination.

General Procedures

To apply for relief, a requesting spouse has to file Form 8857, Request for Innocent Spouse Relief, or submit a written statement to the IRS containing the same information required by Form 8857.When a taxpayer files such a request under Sec. 6015, the IRS will issue a preliminary determination letter based on the claims merits. If the determination grants full or partial relief to the requesting spouse, the Service will suspend processing of the claim for 45 days, pending an appeal by the nonrequesting spouse, and notify the requesting spouse that the nonrequesting spouse has the right to protest the preliminary determination. The IRS will notify both spouses simultaneously of a preliminary determination to grant full or partial relief.

The nonrequesting spouse can file a written protest and seek an Appeals conference, by requesting it in writing within 30 calendar days of the mailing date of the preliminary determination notice. Such a request suspends further processing of the requesting spouse's claim for relief pending the outcome.

If only the nonrequesting spouse files a written protest asking for an Appeals conference, the Service will notify the requesting spouse of the nonrequesting spouse's action. If the IRS proposes to change the preliminary determination after the Appeals conference with the nonrequesting spouse, the requesting spouse will be able to ask for an Appeals conference before a final determination.

On the other hand, if only the requesting spouse files a written protest asking for an Appeals conference, the Service will notify the nonrequesting spouse of the requesting spouse's protest and hold an Appeals conference with the requesting spouse. If Appeals proposes to increase the relief recommended, the nonrequesting spouse can request an Appeals conference.

If both spouses file written protests asking for Appeals conferences, the 112.S will notify each of the other's request, and hold a separate Appeals conference with each spouse and permit both to submit information. At its discretion, the Service may decide to hold a joint Appeals conference to expedite a resolution and reach a final determination.

Under these general procedures, both spouses can claim innocent spouse relief for the same return. Thus, each could be a requesting spouse and nonrequesting spouse under this process.

Conclusion

Under Rev. Proc. 2003-19, the nonrequesting spouse not only has the right to be notified of" the requesting spouse's claim for relief and to submit information for consideration in an IRS administrative determination, but he or she can also file a protest and receive an Appeals conference on an IRS determination.

Rev. Proc. 2003-19 is effective for innocent spouse relief claims filed after March 31, 2003, and to earlier-filed claims for which the Service has not issued a preliminary determination as of April 1,2003.

FROM FRANK TAYLOR, CPA, HOWARD, WERSHBALE & CO., CLEVELAND, OH

Mark H. Ely, J.D., CPA

Partner

Washington National Tax

KPMG LLP 

Washington, DC