party who signed the return, and would a financial hardship exist if the applicant was required to pay the tax? Monthly income and expenses must be detailed on the application for relief. The applicant must attest that he/she did not significantly benefit from the unpaid taxes. Economic hardship is determined from the responses on Form 8887.
Relief by Separation of Liability If a joint return was filed during the time a spouse files Form 8557, and the spouses are no longer married or living in the same household, a spouse can request unpaid tax liability relief via separation of liability. The applicant will not be responsible for joint and several liabilities, and the IRS will allocate liabilities between the spouses.
Equitable Relief Equitable Relief is available to applicants who do not qualify for the aforementioned forms of relief. Relief may be allowed on a correctly filed tax return, but the entire tax amount was not paid. There are many criteria for establishing equitable relief, and it is available only to the extent general relief or separate liability relief is unavailable. A requesting spouse who is still married to or living with the non-requesting spouse can seek only general or equitable relief. A separated or divorced spouse can qualify for separate liability relief. Form 8857 used to be filed within two years of the first collection attempt. In July 2011, the IRS revised its twoyear rule for taxpayers requesting equitable relief. The IRS procedure is
to notify each spouse on a joint return when liabilities exist and assessments are made. Notices serve as early warnings and continue to update with increasing interest. When the IRS does not receive a response to notices, levies and collection activities follow. Rosemary F. Ervin, CPA, is a tax consultant for The Hunter Group LLC. She is a member of the New Jersey Society of CPAs Federal Taxation and State Taxation interest groups and the New Jersey CPA magazine Editorial Advisory Board. Contact her at 201-693-9821.
Member Benefit The NJSCPA can find you per diem help during tax season at njscpa.org/ career/job-bank.
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At WHITMAN BUSINESS ADVISORS we leverage our extensive industry knowledge, leading merger and acquisition advisory experience, partner talent acquisition and practice management consulting service expertise to deliver strategies that help our clients capitalize on PRACTICE CONTINUITY and SUCCESSION PLANNING opportunities. To learn more about WHITMAN BUSINESS ADVISORS LLC contact PHILIP WHITMAN at 732.970.6412 or pw@whitmanbiz.com.
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NEW JERSEY CPA • JANUARY • FEBRUARY 2012
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