Tuesday, December 20, 2011

Innocent Spouse – Considerations when threshold but not safe harbor met

A requesting spouse such as petitioner, who satisfies the threshold conditions but fails to satisfy the safe harbor conditions is nevertheless eligible for relief under 6015(f) if, taking into account all the facts and circumstances, it is inequitable to hold the requesting spouse liable for an underpayment. No single factor is determinative, all factors are to considered and weighed appropriately, and the listing of factors is not intended to be exhaustive.

-Economic hardship for these purposes is defined as the inability to pay reasonable basic living expenses if the requesting spouse is held liable for the tax owed. The ability to pay reasonable basic living expenses is determined by considering among other things the following nonexclusive factors: The taxpayer’s age; employment status; ability to earn; number of dependents; expenses for food, clothing, housing, medical, and transportation; and any extraordinary circumstances.

Those factors are: (1) Marital status; (2) economic hardship; (3) whether the spouse seeking relief knew or had reason to know that the other spouse would not pay the income tax liability; (4) the other spouse’s legal obligation to pay the tax liability; (5) whether the spouse seeking relief obtained a significant benefit from the nonpayment of the tax liability; and (6) whether the spouse seeking relief complied with Federal income tax laws (7)presence of spousal abuse during period when liability was accrued

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