New rules for innocent spouse equitable relief

Recent IRS revenue procedure gives more weight to economic hardship and abuse.

The IRS Restructuring and Reform Act of 1998, P.L. 105-206, expanded innocent spouse relief into three categories: Sec. 6015(b) traditional innocent spouse relief; Sec. 6015(c) allocation of liability; and Sec. 6015(f) equitable relief. Since then, the IRS has received tens of thousands of innocent spouse relief requests annually. The National Taxpayer Advocate has consistently reported that innocent spouse claims are among the most serious problems faced by taxpayers, and innocent spouse relief has been one of the 10 most-litigated tax issues in the past decade.

Sec. 6015(f) equitable relief serves as the last resort for taxpayers who do not qualify for Sec. 6015(b) or (c) relief. However, Sec. 6015(f) itself gives no specific guidelines for determining when equitable relief should be granted, stating only that under procedures it prescribes, the IRS can grant relief when it would be inequitable to hold an individual liable for all or part of an unpaid tax or deficiency, taking into account all the facts and circumstances.

The IRS has provided specific guidance in a series of revenue procedures for determining whether a taxpayer qualifies for Sec. 6015(f) equitable relief and the procedures and rules for applying for it. The most recent of these is Rev. Proc. 2013-34, which the IRS issued in September 2013 after issuing it in proposed form as Notice 2012-8 in January 2012. While this revenue procedure is similar in many ways to its predecessor, Rev. Proc. 2003-61, it changes the way the IRS will treat a number of important of factors in its analysis of taxpayers’ claims, including how the IRS will weigh economic hardship and the presence of abuse. Rev. Proc. 2013-34 also differs from Rev. Proc. 2003-61 in that it no longer asserts a limitation period of two years after the date of the IRS’s first collection activity with respect to the requesting taxpayer for filing a claim for equitable relief; however, the IRS had formally abandoned this position in 2011 in Notice 2011-70.


When signing a joint tax return, a married couple become jointly and severally liable for the entire tax associated with that return. In some situations, joint and severable liability could be considered extremely unfair to one of the spouses. For example, embezzled funds are includible in gross income (James, 366 U.S. 213 (1961)). Even if a spouse does not know of the other spouse’s unreported embezzled money, the “innocent” spouse is still separately responsible for the tax liability.

To redress this unfairness, Congress implemented the innocent spouse relief provisions under Sec. 6015, which allows an innocent spouse (the “requesting spouse”) to request three types of relief. Sec. 6015(b) offers relief from understatements of tax attributable to erroneous items of the other, or “nonrequesting,” spouse that the requesting spouse, upon signing the return, did not know about and had no reason to know, where it would be inequitable to hold the requesting spouse liable for the resulting deficiency. Sec. 6015(c) provides an election that allows a qualifying spouse to limit his or her liability for a deficiency from a joint return to the spouse’s allocable portion of the deficiency. Under Sec. 6015(f), where the requesting spouse does not qualify for relief under Sec. 6015(b) or (c), the IRS can grant equitable relief if, under the facts and circumstances, it would be inequitable to hold the innocent spouse responsible for the tax liability.

To provide guidance on Sec. 6015(f) equitable relief, the IRS issued Rev. Proc. 2000-15, which was superseded by Rev. Proc. 2003-61, which in turn was superseded by Rev. Proc. 2013-34. The latest guidance, while it makes a number of significant changes, follows the same general framework of prescribing seven threshold conditions for an equitable relief request. Once those conditions are met, the IRS can make a “streamlined” determination of equitable relief based on three factors (described below). If the requesting spouse does not meet those criteria, the IRS can make a determination of equitable relief based on the overall facts and circumstances. Section 4.03(2) of Rev. Proc. 2013-34 sets out seven factors that the IRS will use as guides in making a determination based on the overall facts and circumstances but notes that the list is not exclusive and that the IRS will take into account other relevant factors.

The seven factors are (1) marital status of the requesting spouse; (2) any economic hardship the requesting spouse will suffer if relief is not granted; (3) knowledge or reason to know by the requesting spouse of the item or items giving rise to the understatement or deficiency in an understatement case and knowledge or reason to know that the nonrequesting spouse would not or could not pay the tax liability within a reasonable period of time after filing the return in an underpayment case; (4) whether either spouse has a legal obligation to pay the liability, such as under a divorce decree or other legally binding agreement; (5) whether the requesting spouse received a significant benefit from the unpaid tax liability or understatement; (6) whether the requesting spouse has made a good-faith effort to comply with the income tax laws in the years following the tax year or years to which the request for relief relates; and (7) the requesting spouse’s mental or physical health. In evaluating a claim for relief, no one factor or a majority of factors are necessarily determinative, and the degree of importance of each factor varies from case to case.


Rev. Proc. 2013-34 makes the following changes to the threshold conditions for equitable relief:

Time extension for filing. Under Regs. Sec. 1.6015-5(b) and Section 4.01(3) of Rev. Proc. 2003-61, the requesting spouse was required to have filed the equitable relief claim no later than two years after the date of the IRS’s first collection activity. The Tax Court in Lantz, 132 T.C. 131 (2009), and other cases ruled that the two-year limitation was a misinterpretation of Sec. 6015(f). The Fourth Circuit, however, reversed and remanded the holding in Lantz (607 F.3d 479 (4th Cir. 2010); see also “Innocent Spouse Relief: Alternatives After the Lantz Case,” JofA, Dec. 2010, page 46). Despite its court victory, the IRS removed the two-year limitation with provisional guidance in Notice 2011-70 and, in August 2013, proposed revisions to the regulations (REG-132251-11). Consistent with Notice 2011-70 and the proposed regulations, the time limitations for filing a request for relief in Rev. Proc. 2013-34 are based on the limitation period for collection of income taxes in Sec. 6502 and the limitation period for making a claim for refund in Sec. 6511. If the requesting spouse is requesting relief from an unpaid liability, the request must be made generally within the 10 years following the tax assessment (Sec. 6502). However, when the requesting spouse makes a claim for a credit or refund, the request must be filed generally before the later of three years after the return was filed or two years after the tax was paid (Sec. 6511).

Abuse exception for asset transfers. Rev. Proc. 2003-61 provided that if the nonrequesting spouse transferred disqualified assets to the requesting spouse, relief would be limited to the excess of the tax liability over the value of the disqualified assets. Rev. Proc. 2013-34 makes an exception to this rule when the nonrequesting spouse abused the requesting spouse or maintained control over the household finances, or the requesting spouse did not have actual knowledge of the transfer of disqualified assets.

Attributable to the requesting spouse. Rev. Proc. 2003-61 provided four exceptions (community property law, nominal ownership, misappropriation by the nonrequesting spouse of funds intended for paying tax, and abuse by the nonrequesting spouse of the requesting spouse not amounting to duress) that allow the IRS to consider granting relief even if the underpayment or deficiency was attributable to the requesting spouse. Rev. Proc. 2013-34 adds an exception for instances where the nonrequesting spouse’s fraud is the reason for the erroneous item. For example, a nonrequesting spouse fraudulently sold a requesting spouse’s separate property but did not report the gain from the sale on the joint tax return. Although the gain on the sale normally would be attributable to the requesting spouse, the liability will be attributable to the nonrequesting spouse because the fraud was committed by the nonrequesting spouse.


In Rev. Proc. 2003-61, the IRS provided that in cases involving underpayments of tax, if the requesting spouse met a number of specific requirements, it would ordinarily grant equitable relief. In Rev. Proc. 2013-34, the IRS provides that it will grant “streamlined” equitable relief if the requesting spouse meets the same requirements. Also, the latest revenue procedure expands eligibility for streamlined equitable relief to include understatements as well as underpayments of tax and to cover claims for equitable relief under the community-property law operation provisions of Sec. 66(c). The three factors considered for a streamlined determination are (1) marital status (the requesting spouse is no longer married to the nonrequesting spouse); (2) economic hardship of the requesting spouse if relief is not granted; and (3) (lack of) knowledge or reason to know of the understatement or underpayment. The latter provision, for Sec. 6015(f) cases, requires that the requesting spouse had no knowledge or reason to know of the understatement or deficiency or to know that the nonrequesting spouse would not or could not pay the underpayment. If the nonrequesting spouse abused the requesting spouse or maintained control over the household finances by restricting the requesting spouse’s access to financial information, and because of the abuse or financial control the requesting spouse was unable to challenge the treatment of items on the return or question or challenge the nonrequesting spouse’s nonpayment of taxes due, this factor will be satisfied even if the requesting spouse had knowledge or reason to know. Fear of retaliation can be an important element of this condition. In Sec. 66(c) cases, the requesting spouse must not know or have reason to know of an item of community income properly includible in gross income that under the allocation rules in Sec. 879(a) would be treated as the income of the nonrequesting spouse.

Rev. Proc. 2013-34 provides more detailed guidance to evaluate the related factors for determining whether to grant equitable relief. Rev. Proc. 2000-15 listed the circumstances under which these factors would be weighed in favor of or against equitable relief. Rev. Proc. 2003-61 identified relevant factors the IRS would consider in making a determination but in general did not identify specific facts or circumstances that would weigh in favor of or against relief. The latest revenue procedure extensively addresses the weighing of specific facts and circumstances and makes the following changes.

No longer married. Rev. Proc. 2003-61 contained two situations (i.e., divorce and legal separation) in the definition of “no longer married to … the nonrequesting spouse.” However, Rev. Proc. 2013-34 extends this definition to include two additional scenarios. First, the new definition includes a situation where the nonrequesting spouse dies, the requesting spouse does not inherit the nonrequesting spouse’s estate, and the estate has sufficient assets to pay the tax liability. Second, it includes the circumstance in which the requesting spouse was not a member of the nonrequesting spouse’s household in the past 12 months.

Economic hardship. Under Rev. Procs. 2000-15 and 2003-61, the economic hardship factor weighed against equitable relief when the requesting spouse would not experience economic hardship if the relief were not granted. Rev. Proc. 2013-34 makes a significant change, providing that if denying relief will not cause the requesting spouse to suffer economic hardship, the economic hardship factor is neutral. Also, when the requesting spouse is deceased, this factor is neutral.

Knowledge or reason to know. Reason to know of the item giving rise to the deficiency was not weighed more heavily than other factors in Rev. Proc. 2003-61. However, actual knowledge of the item giving rise to the deficiency was considered a strong factor weighing against relief. That is, if the requesting spouse had actual knowledge of the item giving rise to the deficiency, relief would be granted only in limited situations. In Rev. Proc. 2013-34, actual knowledge of the item giving rise to the understatement or deficiency is not weighed more heavily than any other factor.

Significant benefit. Rev. Procs. 2000-15 and 2003-61 provided that when the requesting spouse significantly benefited from the unpaid liability or items giving rise to the deficiency, this factor weighed against relief. Rev. Proc. 2013-34 clarifies the application of the significant-benefit factor. If the requesting spouse enjoyed the benefits of a lavish lifestyle, this factor, as it has in the past, will weigh against relief. However, Rev. Proc. 2013-34 states that if the nonrequesting spouse controlled the household and business finances or there was abuse such that the nonrequesting spouse made the decision on spending for a lavish lifestyle, then this mitigates this factor so that it is neutral. The latest revenue procedure also provides that if only the nonrequesting spouse gained a significant benefit or enjoyed the benefit at the cost of the requesting spouse, the factor will weigh in favor of relief. If the tax liability was small and neither spouse received a significant benefit, this factor is neutral.

Compliance. Rev. Proc. 2013-34, unlike the previous revenue procedures, provides specific rules for the compliance factor, based on the requesting spouse’s marital status and filing status. Where the requesting spouse is divorced from the nonrequesting spouse or remains married but filed separate tax returns:

  • If the requesting spouse is compliant with income tax laws, this factor is in favor of relief.
  • If the requesting spouse is not compliant with the law, this factor is against relief.
  • If the requesting spouse is not fully compliant but has made a good-faith effort to comply, this factor is neutral.
  • Where the requesting spouse remains married to the nonrequesting spouse and continues to file joint tax returns:
  • If these returns are compliant with the law, this factor is neutral.
  • If these returns are not compliant with the law, this factor is against relief.

Abuse. Rev. Proc. 2013-34 gives greater deference to the presence of abuse than Rev. Proc. 2003-61 in determining equitable relief, incorporating it into the analysis of other factors. That is, the presence of abuse may cause certain factors to weigh in favor of relief when otherwise these factors might have weighed against relief. For example, abuse of the requesting spouse by the nonrequesting spouse could outweigh the requesting spouse’s knowledge or reason to know of the understatement or deficiency. Accordingly, the presence of abuse in this situation could change the knowledge-or-reason-to-know factor from being against relief to being in favor of it.


Rev. Proc. 2013-34 is effective for requests for relief filed on or after Sept. 16, 2013, as well as for requests pending as of that date, whether with the IRS, including its Office of Appeals, or in a case docketed with a federal court.

It remains to be seen how courts will apply Rev. Proc. 2013-34’s provisions. Only three cases have cited the revenue procedure as of this writing. Two of them, Reilly-Casey, T.C. Memo. 2013-292, and Zimmerman-Phillips, T.C. Summ. 2014-8, provide little insight into how the revenue procedure’s more taxpayer-friendly provisions might be applied. In Reilly-Casey, the Tax Court found that the taxpayer had reason to know of the understatements, had not been abused, was not compliant with her subsequent tax filing requirements, and would not suffer an economic hardship if she were required to satisfy the tax liabilities at issue. Therefore, the court found she was not entitled to relief; however, it is almost certain that the court would have held the same way if it had followed the rules in Rev. Proc. 2003-61. In Zimmerman-Phillips, the understatement was attributable to an item of income of the requesting spouse; thus, she did not meet a threshold condition for equitable relief: Apart from certain enumerated exceptions (including for fraud, as noted above) the tax liability must be attributable to an item of the nonrequesting spouse.

However, Howerter, T.C. Summ. 2014-15, illustrates how the balancing under Rev. Proc. 2013-34 of other factors equally with that of the requesting spouse’s knowledge or reason to know of the deficiency may allow those other factors to weigh in favor of relief. Here, the requesting spouse prepared a joint return for herself and her separated husband. She did not report commission income earned by her husband on the return. Although the requesting spouse denied having received a Form 1099 from her husband reporting commissions he had earned, he testified that he did provide one to her and provided other evidence that led the court to conclude that the requesting spouse had actual knowledge of the commissions. Accordingly, the court found that the knowledge factor weighed against relief. However, the court found three factors in favor of relief: marital status (they were divorced when the request for relief was filed), lack of significant benefit, and compliance. It found that the rest of the factors were neutral. Stating that under Rev. Proc. 2013-34 knowledge of an item giving rise to an understatement or deficiency will no longer weigh more heavily than other factors, the Tax Court granted the taxpayer relief.


It seems likely that equitable relief will be granted more often, given the increased prevalence of equitable relief claims now that the two-year limitation period has been lifted and taxpayers and their advisers fit Rev. Proc. 2013-34’s more nuanced factors to the facts and circumstances. CPAs should review client cases where an innocent spouse request has been made or contemplated to consider whether the new criteria indicate filing or revising a request. Many taxpayers who might have requested relief previously except for more stringent requirements weighing against them may now find factors weighing more persuasively in their favor.



A recent IRS revenue procedure changes how the IRS will treat factors weighing for or against equitable innocent spouse relief under Sec. 6015(f), particularly issues of economic hardship and the presence of abuse. It retains seven threshold conditions for submitting a request for relief.

The new revenue procedure allows “streamlined” determinations of equitable relief, based on the requesting spouse’s current marital status, economic hardship if relief is not granted, and knowledge or reason to know of the understatement or underpayment.

The revenue procedure revises threshold conditions for equitable relief, including an earlier announced change in policy to allow requests any time within the statute of limitation for refunds and collection of income taxes, rather than within two years after the first collection activity. Other revisions provide an abuse exception for asset transfers and address fraud by the nonrequesting spouse.

Equitable relief factors include notable changes to defining economic hardship, abuse, and weighting of knowledge or reason to know of the underpayment or deficiency.

Wei-Chih Chiang ( ), Rachana Kalelkar ( ), and Xiaobo Dong ( ) are assistant professors of accounting at the University of Houston–Victoria in Sugar Land, Texas.

To comment on this article or to suggest an idea for another article, contact Paul Bonner, senior editor, at or 919-402-4434.


JofA article

Innocent Spouse Relief: Alternatives After the Lantz Case,” Dec. 2010, page 46

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