Equity and Relief from Joint Return Liabilities

Under subsection (f), the Commissioner is authorized to relieve a taxpayer from liability for tax on a joint return if he or she does not meet the requirements for relief under subsections (b) or (c) and 'taking into account all the facts and circumstances, it is inequitable to hold [the taxpayer] liable ' ' The initial determination is committed to the discretion of the Commissioner. In Rev. Proc. 2003-61, 2003-2 C.B. 296, superseding Rev. Proc. 2000-15, 200-1 C.B. 447, the IRS has set out the 'factors' it applies in deciding whether to authorize relief under ' 6015(f). This Revenue Procedure provides the framework for analyzing requests for relief. Section 4.01 identifies seven factors that must be established before the taxpayer is eligible for relief. The important one for this discussion is the requirement that the 'relief is attributable to an item of the [taxpayer's spouse].' This includes a requirement that, in cases involving the failure to pay an assessed tax, the failure to pay must be from assets of the taxpayer's spouse (called the 'nonrequesting spouse'), unless there is misappropriation by the spouse or other, similar misconduct.

Section 4.02 sets out three elements which, when all are satisfied, will 'ordinarily' justify relief. These elements include a reasonable belief that the taxpayer's spouse would pay the tax (no knowledge or reason to know that the tax would not be paid) and economic hardship, which, in the Service's view, would be caused by the imposition of liability (aggravation of existing hardship would not be a reason to grant relief). If these elements do not justify relief, then ' 4.03 describes additional factors to take into account, including knowledge, economic hardship and the fact that the taxpayer received 'significant benefit' from the failure to pay the liability. Note that if enough of these factors are viewed as supporting relief, they can outweigh knowledge (or reason to know) the liability would not be paid.