Case in Point:  Harvard Tax Clinic, a Low Income Taxpayer Clinic (LITC), responded to a request for public comment with its written comments for changes advocated by its clinic and other LITCs, the American Bar Association (ABA), and TAS. 

Over the past year, an IRS task force, which included TAS representatives, considered public and internal comments to improve Form 8857, Request for Innocent Spouse Relief. In June 2021, the IRS released the revised draft form, which included several improvements. Commenting on IRS products is an important avenue taxpayers can use to make themselves heard and suggest improvements for tax administration. The revision of Form 8857 is one example, demonstrating how the IRS can collaborate with the public to improve its service to taxpayers and support taxpayer rights. You can view the draft form by searching for Form 8857 here.

What is Innocent Spouse Relief

When married couples file a joint return, they are jointly and severally liable for any deficiency or tax due, meaning the IRS can collect the entire amount due from either taxpayer. Internal Revenue Code (IRC) § 6015 provides for relief from this joint and several liability. Subsection (b) provides for “traditional” relief from tax deficiencies attributable to the other joint filer when the taxpayer requesting relief did not know or have reason to know of the understatement and taking into consideration all the facts and circumstances it would be inequitable to hold the taxpayer liable. Subsection (c) provides “separation of liability” relief from deficiencies to joint filers who are divorced, legally separated, not living together for the preceding 12 months, or widowed, and is available unless the IRS shows that the taxpayer requesting relief actually knew of the understatement. For purposes of § 6015, a deficiency and an understatement are the same. The requester of subsection (c) relief has the burden of proof with respect to the allocation of the deficiency between the spouses. Subsections (b) and (c) both have two-year deadlines from the time the IRS begins collection activities to request relief. Subsection (f), which does not have the two-year deadline, provides for “equitable relief” from both deficiencies and underpayments, and requires the IRS to consider of all the facts and circumstances to determine whether it is inequitable to hold the taxpayer liable for the tax. Equitable relief is available only if relief is not available under subsections (b) or (c), so the IRS first considers relief under those subsections and then considers whether to grant equitable relief. The taxpayer must request equitable relief within the period of limitation on collection of tax in § 6502 or within the period of limitation on credit or refund of tax in § 6511, as applicable to the joint tax liability. The IRS uses the same form, Form 8857, to consider all types of relief. Having a complete picture of the events that surrounded the understatement or underpayment is particularly important for the IRS in determining whether to grant equitable relief. Generally, around 37,000 taxpayers request relief each year by filing Form 8857.

June 2021 Draft Form 8857 Changes

The draft Form 8857 reflects an important statutory change made to IRC § 6015 after the 2014 revision of the form. In the Taxpayer First Act, enacted in 2019, Congress added paragraph (7) to IRC § 6015(e). The new paragraph provides that if the Tax Court reviews the IRS’s decision to deny innocent spouse relief, the Court is limited to consideration of ‘‘(A) the administrative record established at the time of the determination, and (B) any additional newly discovered or previously unavailable evidence.” Taxpayers, especially pro se taxpayers, may not realize the significance of evidence they have, or the consequences of failing to provide it to the IRS. The revised form alerts taxpayers of the need to make the administrative record as complete as possible in the light of the statutory change. Other important changes to the form include:

• Allowing taxpayers, by checking a box on the form, to change their address of record; and
• Directing taxpayers to IRS Publication 971, Innocent Spouse Relief, which contains a description of the factors the IRS considers in evaluating claims for innocent spouse relief.

The revised form also asks for information that will help the IRS communicate better with taxpayers while respecting their privacy and recognizing that they may have safety concerns.

The revised form:

• Solicits the taxpayer’s primary or preferred language;
• Allows the taxpayer to authorize the IRS to leave a voice message at the phone number the taxpayer provides; and
• Asks the taxpayer to provide their “best or safest” phone number instead of just their “daytime” phone number.

In addition, the form was revised to replace checkboxes with requests for narrative descriptions and explanations about the taxpayer’s situation. As noted in the June 24, 2021 Procedurally Taxing blog, the form also changed the question that asked whether the taxpayer signed a joint return to ask whether the taxpayer intended to file a joint return.

By explaining how requests for relief are evaluated and eliciting complete information about the taxpayer’s facts and circumstances, the IRS is supporting taxpayers’ rights to be informed, to quality service, and to a fair and just tax system. Receiving comments from taxpayers helps the IRS understand how it can meet their needs.

Remember Taxpayers Can Provide Comments Even if Comments Haven’t Been Solicited

Taxpayers can see here if the IRS has filed a notice in the Federal Register seeking public comment about a project or document, including an IRS form, and can sign up to be notified when these notices are filed. Even if the IRS has not published a notice in the Federal Register seeking comments, taxpayers can submit a comment or suggestion about an IRS form or publication here. The more information the IRS has on the complexities of an issue or the administration of a proposed procedure, form, or instruction, the more informed or administrable its decision will be. As highlighted above, one commenter successfully used this platform to suggest changes on Form 8857. Although the IRS may not adopt taxpayers’ or practitioners’ recommendations, it will consider the suggestions in implementing future forms, publications, or revisions.

Conclusion and Recommendations

The revision of Form 8857 is just one example of how the IRS can collaborate with the public to improve its service to taxpayers and support taxpayer rights. Improving taxpayer service and promoting a fair and just tax administration is a right and obligation all practitioners and taxpayers must advocate for. As the National Taxpayer Advocate, I welcome your views and suggestions and we look to the tax community for assistance to continuously improve tax administration; a win-win for all.