Dems push IRS on 'innocent spouse' protection

Congressional Democrats are pushing the IRS to look into a policy they say harms people whose husband or wife may have left them unwittingly liable for unpaid taxes.

As it stands, a so-called “innocent spouse” has two years to file for protection if he or she is not responsible for unpaid taxes from a return jointly filed with his or her spouse. In separate letters to the IRS earlier this week, a trio of Senate Democrats and close to 50 House Democrats called that policy unfair, noting that the IRS has a full decade to pursue those sorts of unpaid tax cases. 

Congress passed legislation in 1998 designed to help husbands or wives who didn’t know their spouse had evaded tax laws. But the legislation did not specify how long spouses had to file for protection, and the Treasury Department and IRS eventually set the deadline at two years after the IRS initiates collection activity on a case. 

According to the group of House Democrats, spearheaded by Reps. Pete Stark (D-Calif.) and Jim McDermott (D-Wash.), around 50,000 innocent spouse claims are filed with the IRS each year, and the current policy disproportionately affects women. 

In their letter, the 49 lawmakers — including all the Democrats who sit on the tax-writing House Ways and Means Committee — also told Doug Shulman, the IRS commissioner, that his agency had “violated the spirit of the original law” in cutting off the ability to file for protection after two years. 

For their part, the three Democratic senators — Max Baucus of Montana, the chairman of the Finance Committee; Tom Harkin of Iowa; and Sherrod Brown of Ohio — sounded a similar note in their message to Shulman.

“We are concerned this two-year limitation denies relief to the very taxpayers the law was designed to help — the innocent spouses unaware of these IRS collection activities because of intimidation or deception by their spouse,” Baucus said in a statement. “We must re-evaluate these limits so all taxpayers are treated justly and have time to file for tax relief they deserve.”

Nina Olson, the national taxpayer advocate, has also called for the two-year limit to be extended.

In their letter, the Senate Democrats asked the IRS to re-evaluate the two-year rule, while the House Democrats asked Shulman to withdraw it.