Back on January 5, 2012, the IRS issued Notice 2012-8, which was a proposed Revenue Procedure that would expand and liberalize the IRS procedures for evaluating Innocent Spouse claims. On September 16 ,2013, after a period of taking comments on the proposed new procedures, the IRS issued them in final form as Rev. Proc. 2013-34. Rev. Proc. 2013-34 is effective for requests for relief filed on or after September 16, 2013, and is also effective for relief requests pending on that date, whether with the IRS, its appeals office, or a Federal Court. While the IRS has, at least in theory if not always in practice, following Notice 2012-8 from the date of its promulgation, the publication of Rev. Proc. 2013-34 not only states the new procedures in final form, but also assures that the Federal Courts, and in particular the U.S. Tax Court, will also follow the new standards for evaluating Innocent Spouse claims.
Rev. Proc. 2013-34 is some 27 pages long, and it is difficult to succinctly state all of the improvements in the procedure in this article, but we would like to give at least some examples of the manner in which the procedures are dramatically changed from those procedures the IRS had been following in its earlier procedural rule, Rev. Proc. 2003-61.
Probably the most important change is the substantial expansion in the new procedure of the definitions of abuse by, and financial control exercised by, the spouse who is not seeking relief (such spouse is called the “nonrequesting spouse”). Rev. Proc. 2013-34 states that if the nonrequesting spouse abused the requesting spouse or maintained control over the household finances by restricting the requesting spouse’s access to financial control so that the requesting spouse was unable to question the treatment of items on the joint return for fear of retaliation by the other spouse, then that abuse or financial control is a factor weighing in favor of relief. Under the prior rule a requesting spouse’s knowledge of an item was a strong factor weighing against relief. The definition of abuse in Rev. Proc. 2013-34 is also now broad enough to cover not only overt physical abuse but “psychological, sexual, or emotional abuse, including efforts to control, isolate, humiliate, and intimidate the requesting spouse, or to undermine the requesting spouse’s ability to reason independently and be able to do what is required under the tax laws.”
These and other changes will mean that persons filing innocent spouse claims are more likely to enjoy success not only with the IRS, but with the Tax Court which will now apply the new rules as well.