IRS Removes Two Year Time Limit for Innocent Spouse Relief
In 2000, Cathy Marie Lantz must have felt like she was living in a nightmare. As USA Today reported in June, Cathy’s husband, Dr. Richard Chetnik, a dentist with a seemingly successful practice, was arrested on charges of Medicare fraud. Soon after Richard’s arrest, Cathy received the shocking and completely unexpected news that she and her husband owed the IRS nearly $900,000.
Due to the fact Cathy was not aware of the debt she and her husband owed to the IRS, Richard assured Cathy that he would file an Innocent Spouse Relief application on her behalf. This application would have enrolled Cathy in the legal process by which spouses in situations like hers can be relieved of the responsibility of paying their spouse’s unpaid taxes, even if they signed a joint tax return. Tragically, however, Richard died before he filed the claim, leaving Cathy to do so a full three years after receiving notice of the additional taxes. By this time, Cathy’s application was denied on the basis she had not paid the debt in two years after receiving the IRS’ collection notice. Yet even though the tax court overruled the IRS decision, the appeals court upheld the two year timeline, making Cathy still liable for the debt.
Sadly, Cathy’s situation is not an isolated incident. Each year, the IRS receives more than 50,000 applications for innocent spouse relief. Yet many of these appeals were rejected due to the “two year deadline”, a time frame which held innocent spouses responsible for paying back their debt within two years of receiving a collection notice from the IRS. Whether it is divorce, fraud or death, many spouses never saw the collection notice, or, as in Cathy’s case, were not aware their petition was not filed by their spouse.
As a former federal tax litigation attorney, I saw the need for a change in IRS regulations to provide for innocent spouse relief. That is why earlier this year I reintroduced H.R. 1450, the Innocent Spouse Relief Act with my colleague Rep. Mike Fitzpatrick (PA-08). This common sense bill sought to remove the two year time limit which had left millions of innocent taxpayers like Cathy Lantz with a debt they should never be expected to pay. Because, due to no fault of their own, they passed the two year deadline for paying back a debt of which they were never even aware.
Earlier this week I was thrilled to learn that the IRS has decided to eliminate the two year deadline in most future innocent spouse relief cases. I believe this move by the IRS is a positive step in relieving spouses from the burden of their partner’s irresponsibility.
Due to the fact Cathy was not aware of the debt she and her husband owed to the IRS, Richard assured Cathy that he would file an Innocent Spouse Relief application on her behalf. This application would have enrolled Cathy in the legal process by which spouses in situations like hers can be relieved of the responsibility of paying their spouse’s unpaid taxes, even if they signed a joint tax return. Tragically, however, Richard died before he filed the claim, leaving Cathy to do so a full three years after receiving notice of the additional taxes. By this time, Cathy’s application was denied on the basis she had not paid the debt in two years after receiving the IRS’ collection notice. Yet even though the tax court overruled the IRS decision, the appeals court upheld the two year timeline, making Cathy still liable for the debt.
Sadly, Cathy’s situation is not an isolated incident. Each year, the IRS receives more than 50,000 applications for innocent spouse relief. Yet many of these appeals were rejected due to the “two year deadline”, a time frame which held innocent spouses responsible for paying back their debt within two years of receiving a collection notice from the IRS. Whether it is divorce, fraud or death, many spouses never saw the collection notice, or, as in Cathy’s case, were not aware their petition was not filed by their spouse.
As a former federal tax litigation attorney, I saw the need for a change in IRS regulations to provide for innocent spouse relief. That is why earlier this year I reintroduced H.R. 1450, the Innocent Spouse Relief Act with my colleague Rep. Mike Fitzpatrick (PA-08). This common sense bill sought to remove the two year time limit which had left millions of innocent taxpayers like Cathy Lantz with a debt they should never be expected to pay. Because, due to no fault of their own, they passed the two year deadline for paying back a debt of which they were never even aware.
Earlier this week I was thrilled to learn that the IRS has decided to eliminate the two year deadline in most future innocent spouse relief cases. I believe this move by the IRS is a positive step in relieving spouses from the burden of their partner’s irresponsibility.
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