Proposed regulations govern innocent spouse relief.

• Author: Schreiber, Sally P.

The IRS proposed more detailed rules governing innocent spouse relief under Sec. 6015 on Nov. 18 (REG-134219-08).

One significant change the proposed rules make is to provide additional guidance on the application of res judicata in innocent spouse cases. The doctrine of res judicata prevents a spouse from requesting innocent spouse relief when Sec. 6015 relief was at issue in a prior court proceeding or the requesting spouse meaningfully participated in a prior proceeding in which relief under Sec. 6015 could have been raised.

Under Sec. 6015(g)(2), there is an exception to res judicata when a requesting spouse did not meaningfully participate in the prior court proceeding. The proposed rules provide guidance on what meaningful participation entails, giving a nonexclusive list of acts to be considered in making a facts-and-circumstances determination of whether the requesting spouse meaningfully participated in a prior proceeding. The rules also say that a requesting spouse will not be considered to have meaningfully participated in a prior procedure if the requesting spouse established that he or she performed the acts due to abuse by the other spouse or the other spouse maintained control over the requesting spouse, and the requesting spouse did not challenge the other spouse because of fear of retaliation.

The regulations also propose a definition of underpayment or unpaid tax under Sec. 6015(f), which provides for relief where it would be "inequitable to hold the individual liable for any unpaid tax or any deficiency." The regulations propose that "unpaid tax" and "underpayment" would have the same meaning: On a joint return, it is the balance shown as due reduced by the tax paid with the return or on or before the due date for payment (without considering any extension of time to pay). It is determined after applying credits for withholding, estimated tax payments, payments made when requesting an extension, and other credits. Generally, if there is no unpaid tax due, no relief is available under Sec. 6015(f).

The proposed regulations provide detailed rules on credits and refunds in innocent spouse cases, explain how any credit or refund that may be available to a requesting spouse is determined, and provide for allocation of...