IRS Finalizes Procedures for Equitable Relief Under IRC Section 6015

On September 16, 2013, the IRS issued Revenue Procedure 2013-34, which establishes new rules for evaluating Innocent Spouse Relief cases under IRC Section 6015(f) for “Equitable Relief.” The guidelines for evaluating Equitable Relief cases in Revenue Procedure 2013-34 supercede the prior guidelines in Revenue Procedure 2003-61. Revenue Procedure 2013-34 is effective, in general, for cases not decided as of September 16, 2013, or filed on or after September 16, 2013.

In a previous blog article, we explained that the IRS significantly modified its administrative rules for evaluating Equitable Relief cases when it issued Notice 2012-8 on January 5, 2012. Revenue Procedure 2013-34 incorporates all of these modifications. Revenue Procedure 2013-34 also adds a section regarding “fraud committed by nonrequesting spouse” when evaluating whether an item causing an understatement of tax is attributable to a spouse.

The greatest significance of Revenue Procedure 2013-34 is how it will affect court decisions. The courts had no authority to use or interpret the expansive rules of Notice 2012-8 because, under IRC Section 6015, the courts must evaluate whether to grant subsection (f) relief “[u]nder procedures prescribed by the Secretary.” Notice 2012-8 is not a “procedure prescribed by the Secretary.” The courts were required to use and interpret the prior “procedure prescribed by the Secretary,” which was the narrower rules of Revenue Procedure 2003-61. Now, both the IRS and the courts will evaluate Equitable Relief cases under the expansive rules of Revenue Procedure 2013-34.

Revenue Procedure 2013-34 should allow more taxpayers to obtain Equitable Relief. Taxpayers who might not have been eligible for relief in the past should reevaluate the strength of their case under Revenue Procedure 2013-34.