So, what happens is the IRS may apply one spouse’s share of the refund to the other spouse’s non-joint debt, and if this happens, then the non-debtor spouse may seek to recover that share of the refund that was offset; this is what’s called injured spouse relief. Typically, the injured spouse would complete Form 8379, and they have an option to file it with their tax return.
What is IRS Injured Spouse Relief?
You don’t have to wait for the refund that you’re claiming on the tax return to be offset. If you know, for example, that your spouse has pastdue child support, what Susan is saying is you can file that Form 8379 preemptively with your tax return. The form divides out the share of the items on the return. It shows your client’s share of the refund, and so you would be telling the IRS, “If you’re going to offset this, don’t offset my client’s share of it.”
Claiming Refund for Injured Spouse
When you’re dealing with this type of offset situation, which is allowed by Internal Revenue Code section 6402, you have to figure out where is that offset debt, why is there a debt, and where did the offset go. So, if the IRS offsets the refund to pay an income tax, the IRS will issue this notice of offset to the taxpayer.
What is Injured Spouse Relief?
And if the offset is to pay non-tax debts, then the offset notice will come from the Bureau of Fiscal Services. So, it’s important to discuss with your client whether they received a notice from the IRS, whether they received a notice from the Bureau of Fiscal Services; and that will be your path to determining a number of things that flow from the injured spouse determination.
Debtor vs Non-debtor spouse, Injured Spouse Relief
Where there is a joint return and the reason for the offset was to pay a nontax debt, federal regulations do require the IRS to pay back the money that the non-debtor spouse can show was his or her share of the refund. And again, you would use that Form 8379, which shows you how to allocate the income, how to allocate the credits, and so on. Where the joint refund was used to pay a tax liability, the revenue procedures make clear that a portion of the refund may be attributable to the non-debtor spouse. This is because the husband and the wife who file a joint return do not have a joint interest in the overpayment. Each one has a separate interest, and consequently, the IRS can’t offset the entire amount of a joint refund to pay the separate tax debt of the other spouse.
Injured Spouse in Community Property States
There is complexity if the taxpayers resided in community property states because different states have different rules about what property can be used to pay the debtor spouse’s debt. There’s a cited IRM there, that first one. It contains references to various revenue rulings that describe how the allocation is carried out for specific states, so that’s very helpful. There’s also complexity where the joint return claimed the Earned Income Tax Credit and that second cite there to the IRM explains how that computation is made. And then we do have a few practice tips for you.
What is IRS Form 8379?
When you’re looking at Form 8379, question 11 says “Check this box only if you want your refund issued in both names. Otherwise, separate refunds will be issued for each spouse,” and then question 12 says “Do you want any injured spouse refund mailed to an address different from the one on your joint return? If ‘yes,’ enter the address.” So, the default settings are that each spouse will get his or her own refund check, and you may be in a situation where that’s a really good option to have. Because if the separate check goes to a mailbox that the other spouse has access to and the other spouse cashes the check, then the IRS will not intervene. It will apply the Family Disputes provision in the IRM, which just requires that the matter will have to be handled through the civil court system. So, if you think there’s a question of the debtor spouse intercepting this check, you may want to have the
Taxpayer Advocate Service
I think most people in the room are familiar with the Taxpayer Advocate Service. You may not know that our office is established by statute. It’s section 7803 of the Internal Revenue Code, and we actually have two statutory missions. One is to assist taxpayers who are having problems with the IRS, which is the same mission you have, but our other mission is to identify problems that affect groups of taxpayers and systemic problems, and we refer to this as our “systemic advocacy” function. The statute also requires the National Taxpayer Advocate, who is Nina Olson, to report to Congress twice each year, once on June 30th and then again on December 31st . And that December 31st report is required to include a summary of at least 20 of the most serious problems encountered by taxpayers.
Future of innocent spouse relief
So, Nina Olson has been a very effective advocate in reporting to Congress on the problems taxpayers face when they seek innocent spouse relief, and she was a main advocate for removing that two-year rule that we talked about that used to exist for relief under section 6015(f). It’s still there for (b) and (c), but it’s no longer there for section 6015(f). And this revenue procedure, which is a big improvement over previous guidance, the Taxpayer Advocate Service was instrumental in helping to develop that and advocating for better recognition, for example, of the role that domestic abuse can play in cases where taxpayers need either innocent spouse relief or injured spouse relief