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Innocent Spouse: Husbands and wives who sign joint tax returns are
"jointly and severally" liable for any taxes owed. The Internal Revenue Code
allows for relief from certain joint tax liabilities for divorced persons if it can be
shown that the delinquency was caused by "erroneous" information provided by the
other spouse. To qualify for innocent spouse relief, the following conditions must
be established:
A joint
return was filed for the year relief is requested.
There is an understatement
of tax attributable to erroneous items of one individual filing the return.
The spouse did
not know and had no reason to know of the understatement.
It would be inequitable
to hold the person liable for the deficiency considering all the facts and circumstances.
The spouse elects
the benefits of this provision before expiration of two years after
collection action begins.
The IRS Restructuring and Reform Act of 1998
expanded the law with respect to relief from joint and several liability. Internal
Revenue Code Section 6015 was enacted to make relief from joint and several liability
easier to obtain. There are now three kinds of relief available:
Innocent Spouse
relief - IRC Sec. 6015(b)
Election to
allocate a deficiency - IRC Sec. 6015(c)
Equitable
relief - IRC Sec. 6015(f) & 66(c)
Internal Revenue Code Section 6015 is
effective for the following:
Unpaid balances
as of July 22, 1998 and
Liabilities arising after July 22, 1998.
Internal Revenue Code Section 6015(e) was
added to enable taxpayers to petition the United States Tax Court to review denials of
relief.
More information on Innocent
Spouse Relief
Installment Agreement: For those
who cannot pay their back taxes immediately an installment agreement can be a
reasonable payment option. Installment agreements allow for the full
payment of back taxes in smaller, more manageable amounts.
More information on Installment Agreement
Internal
Revenue Service (IRS): Is the United States government agency
that collects taxes and enforces the tax laws. The IRS is a bureau of the
Department of the Treasury. The official U.S. Treasury regulations provide (in
part):
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The Internal Revenue Service is a
bureau of the Department of the Treasury under the immediate
direction of the Commissioner of Internal Revenue. The Commissioner
has general superintendence of the assessment and collection of all
taxes imposed by any law providing internal revenue. The Internal
Revenue Service is the agency by which these functions are
performed.
26 C.F.R. section 601.101(a)
Jeopardy Assessment: Tax
assessment made where there is some danger of tax being lost.
Joint Return: A single return
made jointly by husband and wife.
Joint Venture: Term which is
loosely used to describe a relationship between parties carrying on an
undertaking in common for their individual or common gain. This can be either an
incorporated venture or an unincorporated venture.
Junk Bond: Bonds and debentures
issued by companies that have a low credit evaluation (i.e. below investment
grade) from a rating agency such as Standard & Poor's or Moody's.
Keogh
Accounts: A retirement plan set up for a self-employed
taxpayer that permits him or her to deduct a portion of his or her compensation
from total income. (Similar to a 401(k)).
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