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Wednesday, July 27, 2011

UPDATE: Stark Gets IRS to Eliminate Two-Year Window Affecting 'Innocent Spouse Relief'

After needling by Rep. Pete Stark and other taxpayer advocates, the Internal Revenue Service says it will eliminate the controversial two-year window for so-called "innocent spouses" to report the financial misdeeds of their significant other.

Stark and about 50 lawmakers urged IRS Commissioner Douglas Shulman last April to revisit the regulation that often snagged unsuspecting spouses on the hook. Over 50,000 taxpayers apply for innocent spouse relief, according to the IRS, but critics said the arbitrary two-year window to report fraudulent cases caused an inequity while allowing the IRS to a 10-year window to investigate income tax forms.

Stark says the previous regulation enacted in 1998 was never intended to set up a short time span for reporting misdeeds and disproportionately affected battered women. "This change will benefit the thousands of taxpayers, many of them women escaping abusive relationships, who annually request protection under the rule," Stark said.

According to the Wall Street Journal, more changes to the tax code pertaining to the innocent spouse relief may be coming.

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