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This paper was published as a Faculty Working Paper (no. 198) for the Lubin School of Business, Center for Applied Research, April 2001.

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Abstract

The filing of a joint return by a married couple usually results in overall tax savings. The downside of filing jointly, however, is that the parties to the joint return are together, and individually, responsible for the accuracy of the return, for the full tax liability, and for any interest or penalty relating to the return. This so-called joint and several liability extends not only to the tax shown on the return, but also to any tax that should have been but was not reported on the return. Consequently, each spouse becomes responsible for the tax infractions of the other. Because the joint and several liability rule was found to be overly harsh, since 1971, the tax law has contained a provision under which a spouse could seek relief from liability if he or she met the definition of an innocent spouse. As it turned out, however, the requirements that had to be met in order to obtain innocent spouse relief were very stringent and failed to protect spouses, in most cases the wife or ex-wife, where fairness dictated that relief was warranted. Accordingly, in 1998, Congress significantly liberalized the rules for obtaining innocent spouse relief by enacting a new section of the Internal Revenue Code and expunging the prior provisions. This paper analyzes the new Code section and also analyzes a recent Revenue Procedure, issued in 2000, that details the requirements for obtaining innocent spouse relief under one of the provisions of the new law, namely, equitable relief.

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