Innocent Spouse Relief

Posted on by katemley

IRC 6015


The Tax Court in Vanover v. Comm’r filed April 22, 2025 at T.C. Memo 2025-37 held that the requesting spouse should be granted partial relief under Section 6015(c) with respect to an understatement of the non-requesting spouse, but be denied relief under section 6015(b)(c) and (f) for all other items.  Seems like all of the Innocent Spouse cases are lengthy, and this one is no different at 16 pages plus 2 pages of footnotes. Most times this is due to the lengthy analysis of factors for equitable relief under 6015(f). This case is no different in format to others in that regard. What is of interest and highlighted here is the analysis under 6015(b) and (c). This case is fact heavy, from a nasty divorce that included a physical altercation, to financial mismanagement on behalf of all taxpayers, the Court did a good job of setting the scene. What’s key to know about 6015(b) and 6015(c) is that they both require understatements of income.  Whereas 6015(f) can be used if there is an underpayment of tax.  Under 6015(b), if an additional assessment arises, relief from joint liability can be had if the item is attributable to the other spouse. The requesting spouse must establish that when they signed the return, they did not know and had no reason to know that there was a possible understatement. This is the “traditional,” original form of innocent spouse relief. Under 6015(c), a requesting spouse shall be relieved from liability for deficiencies allocable to the nonrequesting spouse.   In other words, they separate the liability.  Under this provision, in order to obtain relief, you must be divorced, legally separated, or living apart for at least 12 months. The case carefully sorts through all factors of each statute, ultimately denying most relief for the requesting spouse.  Regardless, it is much more common to see equitable relief cases under 6015(f), so this review is rather helpful. 

Passports & Tax Debt

Posted on by katemley

IRC 7345


Affecting a taxpayer’s passport is a powerful tool to force filing and payment compliance, in many instances.  The Tax Court in Pfirrman v. Comm’r, filed March 18, 2025 at T.C. Memo 2025-22 walks us through the analysis.  This particular taxpayer was attempting to inappropriately challenge his underlying liability. But the case details how a passport can be used to motivate taxpayers to comply with filing and paying requirements.  This practitioner has dealt with many clients who have a high level of interest in meeting the statutory goals of IRC 7345.  Under this Code provision, if the Commissioner certifies that a taxpayer has “seriously delinquent tax debt,” then that certification is transmitted to the Secretary of State for action with respect to denial, revocation, or limitation of the taxpayer’s passport. Generally, a seriously delinquent tax debt is a federal tax liability that has been assessed, exceeds $64,000 (2025 inflation adjusted), and is unpaid and legally enforceable.  It should be kept in mind that it is entirely possible to either avoid certification, or have a taxpayer decertified as seriously delinquent, even if they owe over this amount, if they move into a compliant filing and paying status. In other words, once on a valid installment agreement, partial payment installment agreement, or placed into Currently Not Collectible, a taxpayer will no longer be deemed seriously delinquent, no matter how much they owe.  Much of the remaining part of the opinion was an explanation by the Court of the limitations of their jurisdiction under the statute. The Court may reverse certification if it is erroneous, or determine whether the IRS has failed to reverse the certification.  Should the Court find such facts to exist, it is limited to ordering the Treasury Secretary to notify the Secretary of State of such determination.  The Court lacks any further power.  In sum, find a compliant outcome and the matter will automatically be decertified to the Department of State. 

Statute of Limitations on Refunds­

Posted on by katemley

Statute of Limitations on Refunds­—IRC 6511


The Tax Court in the case of Applegarth v. Comm’r, filed December 10, 2024 at T.C. Memo 2024-107, does a good job of exploring the various statutes associated with entitlement to refunds and whether or not equitable tolling has any effect on those statutes. The IRS issued Notices of Deficiencies on two periods – 2014 and 2015, causing the Taxpayer to petition the Court.  Seems the taxpayer in this case did nearly everything correctly, except file his return timely.  For both years, he filed extensions.  And, for both years, he paid significant sums of money towards his tax debt before the due date of the extended return.  He just didn’t file his returns and ultimately the IRS sent him notices of deficiencies based on estimated taxes.  For 2014, the IRS determined there was a $4,465 deficiency, but his return reflected an overpayment of $78,472.  For 2015 the IRS determined there was a deficiency of $25,576 and the return showed an overpayment of $9,603.  While the Court explored many statutes, it is worth highlighting this one in part: 6511(a): “[c]laim for refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer within 2 years from the time the tax was paid.”  All payments of tax were beyond the statutory time frames of this provision.  The taxpayer conceded that if these rules applied, he was out of luck. However, he attempted to argue that equitable tolling should apply. The common law concept that allows a statute to stop running for equitable reasons. The opinion is short on explanation of the taxpayer’s rationale, but through its analysis of the statutes concludes that: “in our view neither statutory provision permits equitable tolling.” 

Offer in Compromise—Deemed Acceptance

Posted on by katemley

IRC 7122(f) 


Bauche v. Comm’r, filed May 20, 2025 at T.C. Memo 2025-48 allows the Court to explore the possibility that the IRS has waited too long to review an Offer in Compromise, and thus under the statute, it is deemed accepted.  The rule in IRC 7122(f) states in part: “[a]ny Offer in Compromise submitted under this section shall be deemed to be accepted by the Secretary if such offer is not rejected by the Secretary before the date which is 24 months after the date of submission of such offer.”  The taxpayer landed in a Collection Due Process hearing after issuance of a lien notice.  During that proceeding, it was determined that filing an Offer in Compromise made sense.  The taxpayer argued that the IRS did not reject its Offer in Compromise until the Settlement Officer issued its Notice of Determination, which was more than 24 months later.  The IRS argued that the Offer had been rejected when Appeals mailed the taxpayer a letter saying the IRS was rejecting the Offer, in spite of the fact that a final Notice of Determination associated with the conclusion of the Collection Due Process hearing had not been sent out.  The Court indicated that if it agreed with the taxpayer, it would have created a dilemma for Appeals because they may not have resolved all issues associated with the Collection Due Process hearing, but could be forced to issue a Notice of Determination to meet the 24 month deadline.  The Court felt that the letter issued by the IRS through Appeals regarding its rejection of the Offer, even though the Appeals hearing was not fully resolved, clearly indicated to the taxpayer that the Offer was rejected.  This illustrates the premise that part of the Collection Due Process hearing process is to entertain collection alternatives, but that is not the entire purpose.