IRS scraps two-year deadline for innocent spouse claims

Under the new IRS policy, the usual deadlines for IRS collection and refund requests will apply to innocent-spouse claims.

In addition to scrapping the two-year limit, the IRS will also not move to collect in some innocent-spouse cases where a ruling already has been made. According to Monday’s announcement, taxpayers who had their request for protection denied solely because they did not meet the two-year deadline also can resubmit their claim, if the IRS collection window has not expired.

Nina Olson, the national taxpayer advocate, and a pair of veteran House Democrats applauded Monday's move, with Olson calling it “a welcome occasion where everyone has emerged a winner.”

"This is a huge victory that removes an arbitrary obstacle for innocent spouses, primarily women, and helps us move toward a more equitable tax system,” Rep. Pete Stark (D-Calif.), a senior member of the tax-writing House Ways and Means Committee, said in a statement.

Rep. Jim McDermott (D-Wash.), another Ways and Means member, and Stark had prodded Shulman to withdraw the two-year rule in an April letter signed by more than 45 other House Democrats.

Sen. Max Baucus (D-Mont.), the chairman of the Finance Committee, and two other Senate Democrats also called on the IRS to look into the matter, while Rep. Michele Bachmann (R-Minn.) introduced legislation this year to get rid of the two-year time limit.

The Treasury Department and the IRS installed the two-year deadline in 2002 regulations, after Congress did not set insert a time limit for this particular claim in legislation aimed at helping innocent spouses.