Innocent Spouse Equitable Relief Refunds: The IRS Abandons the Window Period

In the Internal Revenue Service Restructuring and Reform Act of 1998, Congress broadly expanded innocent spouse relief. Among the most important changes were the new equitable relief provisions under section 6015(f), which for the first time allowed innocent spouse relief in underpayment cases. Although newly enacted section 6015(g) provided authority to allow credits or refunds to most taxpayers eligible for relief under section 6015, the IRS proposed limitations on refunds in section 6015(f) cases. The IRS proposed that refunds would be allowed in equitable relief cases only to taxpayers who made payments between July 22, 1998, and April 15, 1999. This period became known as the window period. In 2003, the IRS abandoned the window period. In this article, Mr. Nadler discusses the IRS use of the window period to deny refunds. He concludes that the IRS use of the window period was in conflict with the statute, was in conflict with congressional efforts to expand innocent spouse relief, and was in conflict with the existing system of laws regarding refunds.