For Immediate Release: Monday, July 25, 2011
WASHINGTON, DC – Today, Congressman Jim McDermott (D-WA) and Congressman Pete Stark (D-CA) praised IRS Commissioner Doug Shulman for correcting the “innocent spouse” rule that limited the time period available to taxpayers to defend themselves from the misdeeds of a spouse. The IRS made the rule-change announcement today.
In the IRS’s announcement, Commissioner Shulman stated, “This change is a dramatic step to improve our process to make it fairer for an important group of taxpayers.”
Today’s rule-change comes after McDermott, Stark and 47 additional Democratic members of Congress called on the IRS in mid-April to address the long-standing problem. Commissioner Shulman responded in late-April and indicated that the IRS was reviewing the innocent spouse rules.
“It is critical that taxpayers who are the victim of fraud are given the strongest protections possible under the law,” said Congressman McDermott. “Today’s decision is a victory for fairness and will provide innocent taxpayers with enough time to seek the relief that they deserve. I applaud the Administration for reviewing the ‘innocent spouse’ rule and revising it in favor of stronger taxpayer protections consistent with Congress’s original intent.”
Congressman Stark added, “This is a huge victory that removes an arbitrary obstacle for innocent spouses, primarily women, and helps us move toward a more equitable tax system. I'm very pleased that the combined efforts of our letter to Commissioner Shulman and the tireless work of National Taxpayer Advocate Nina Olson have led to this positive result.”
The IRS Code’s “innocent spouse” rule protects individuals from liability for a tax return filed with a spouse who broke the law. The rule, however, has only allowed for two years of protection for an innocent spouse, while the IRS has ten years to go after both tax filers. Because of this hole in the tax code, innocent spouses of people who have evaded tax laws have been left on the hook for crimes they did not commit.
Fixing the “innocent spouse’ rule has had widespread support – it was the #3 legislative recommendation included in the IRS’s National Taxpayer Advocate’s 2010 Annual Report to Congress (see page 348). The U.S. Tax Court has also ruled in multiple decisions that the two-year limitation is invalid.
Follow McDermott on Twitter: @RepJimMcDermott.