Taxpayers generally have to submit refund claims to recoup taxes paid to the IRS. The law generally says that these claims have to be in writing, but not necessarily on the IRS’s official forms. Taxpayers submit a number of documents to the IRS. Written protests submitted to the IRS are an example. Can such a protest be considered a claim for refund? The court considered this in the context of an innocent spouse refund claim in Brooks v. Commissioner, T.C. Summary Opinion 2019-5.

Facts & Procedural History

The facts are similar to many innocent spouse cases. The taxpayer-husband had a good year financially, which triggered a tax liability, and then the taxpayers finances declined significantly. The taxes were not paid. The taxpayer-wife filed bankruptcy and had her liability for the taxes discharged.

How the innocent spouse claim arose was not typical. The taxpayer did not submit the IRS’s innocent spouse relief form. Rather, the taxpayer submitted an offer in compromise to attempt to settle the balance. The IRS rejected the offer. The taxpayer then filed a protest to contest the rejection. As part of the protest, he requested innocent spouse relief. The idea was that the taxpayer should not be liable for the portion of the liability attributable to his wife, which was discharged in bankruptcy.

The IRS Office of Appeals did not accept the offer and did not address the innocent spouse relief issue. The taxpayer filed a petition with the U.S. Tax Court asking for innocent spouse relief.

Innocent Spouse Relief

Innocent spouse relief can help spouses who are liable for taxes due to their current or former spouse. It is a remedy that can apply if the taxpayers file an income tax return with a married filing jointly status.

We have previously considered several cases involving innocent spouse issues. This includes innocent spouse refund cases. We have covered one involving a refund for payments made to the IRS with community property, for example (you can read that article here).

Why would someone file an innocent spouse relief refund claim? The answer is that they would file one if the IRS granted innocent spouse relief and the innocent spouse had already paid some or all of the tax to the IRS. Just filing the innocent spouse form and being granted innocent spouse relief does not entitle the innocent spouse to a refund. A request for a refund has to be filed. The refund filing is also required for other purposes.

To be entitled to bring suit, the law requires the taxpayer first file a refund claim to request a refund. Taxpayers generally file amended returns or a Form 843 to request a refund. Assuming the payment was made with the innocent spouse’s separate property and an amended tax return or Form 843 were not filed, what does it take to qualify as a request for a tax refund based on innocent spouse relief?

The courts have held that a written document that is not on the government form can count as a refund claim if the regulations for the claim do not preclude it. This is referred to as an “informal claim.”

With innocent spouse claims, the innocent spouse regulations allow other writings to qualify. To do so, the writings must contain similar information to what would be on the IRS’s form. This allows the IRS to evaluate the merits of the claim and to respond to the innocent spouse refund claim.

Is an Appeals Protest a Refund Claim?

In this case, the taxpayer submitted a written protest to the IRS Office of Appeals. Is this sufficient to count as an informal innocent spouse refund claim? This brings us to the subject of this post.

The court concluded that the appeals protest that did not include the IRS form was not sufficient. It found that the protest was less like a letter asking for a refund that was submitted with the innocent spouse claim. The U.S. Tax Court had previously concluded that a letter attached to the innocent spouse form was a claim for refund.

The court didn’t explain its reasoning, but the appeals protest submitted in this case is different. It apparently did not contain all of the information that would have been included on the IRS’s innocent spouse form. This is somewhat surprising as most protests submitted to Appeals are very detailed. But perhaps the protest did not include the word “refund” anywhere in it. Also, importantly, the protest was not submitted to the IRS exam function’s innocent spouse program.

The Takeaway

The case serves as a reminder that the IRS’s forms should be submitted where possible. Had the taxpayer included the IRS’s innocent spouse form and letter requesting a refund with his protest, the outcome may have been different. In theory, Appeals would have then forwarded the innocent spouse claim to the service center or examination function and that would have counted as an informal innocent spouse refund claim.

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