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Divorce CPA in NC discusses revised Innocent Spouse Relief | Form 8857 2012

divorce CPA Wilmington NC Form 8857 innocent spouse relief

Gary Bode, CPA: I'm a divorce CPA that stays on top of changes in Innocent Spouse relief. For a free phone consult, please call 399-2705.

Divorce CPAs have seen lots of changes in the IRS approach to Innocent Spouse Relief over the last two years. Initially prompted by tax court cases, the IRS seemed reluctant to expand the time frame and scope of using Form 8857. But under Commissioner Shulman, they are now champions for victimized taxpayers.

For more Information on Divorce CPA Topics and Innocent Spouse Relief

For more information on general Innocent Spouse Relief, click on the Form 8857 link in the right sidebar, or the Divorce CPA link under Services on the left sidebar.

New Form 8857 Changes for 2012

In 2011, they revised Form 8857. In 2012 they somewhat formalized what divorce CPAs had already been doing, through new temporary proposed regulations, which they explicitly state remain in effect until the finalized regs are published.

Innocent Spouse Relief is more like a court case than a true tax case. Form 8857 is full of subjective questions. Each situation is unique and multiple factors are weighed to determine the outcome. One of the new expansions divorce CPAs can exploit? The victimized spouse can now have known about the other spouse’s tax fraud. This factor used to be weighted against the innocent spouse. But this factor covers a range of circumstances. The innocent spouse generally needs to have been powerless to prevent the fraud despite some knowledge about it.

“The IRS is significantly changing the way we determine innocent spouse relief,” said IRS Commissioner Doug Shulman. “These improvements should dramatically enhance our process to make it fairer for victimized taxpayers facing difficult situations.”

This Form 8857 process has taken about two years, and divorce CPAs helped initiate the action through tax court cases. This is an example of CPAs proactively advocating for clients  in grey areas where change can be anticipated. Please note, we’ve been predicting this change for awhile now.

I’m a divorce CPA that stays on top of changes in this dynamic field. My virtual office allows service to long distance and international clients. My physical offices are in Wilmington NC and Leland NC. Please read some of the postings on this site to get a better feel for how I approach Innocent Spouse Relief and Form 8857. For a free, empathetic phone consult, call (910) 399-2705.

Here’s the IRS blurb cut and pasted. The temporary regs seemed too technical to post, but they’re available online at IRS.gov.

WASHINGTON — The Internal Revenue Service today released new proposed guidelines designed to provide relief to more innocent spouses requesting equitable relief from income tax liability.

A Notice proposing a new revenue procedure, posted today on IRS.gov, revises the threshold requirements for requesting equitable relief and revises the factors used by the IRS in evaluating these requests. The factors have been revised to ensure that requests for innocent spouse relief are granted under section 6015(f) when the facts and circumstances warrant and that, when appropriate, requests are granted in the initial stage of the administrative process. The new guidelines are available immediately and will remain available until the finalized revenue procedure is published. The IRS will immediately begin using these new guidelines when evaluating equitable relief requests.

This is the second major change made to the innocent spouse program. In July, the IRS extended help to more innocent spouses by eliminating the two-year time limit that previously applied to requests seeking equitable relief.

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