Michigan Estate Planning Blog

IRS Relaxes “Innocent Spouse” Relief Rules

Spouses filing taxes jointly make a very special commitment. Aside from being already committed to marriage, joint filing makes them jointly and severally liable for those taxes, or any problems. This can create a significant problem when one spouse runs afoul of the tax laws. Why? It can drag the other spouse into the matter, unless you can convince the IRS to grant “innocent spouse relief.” Luckily, what was once very tricky might now be much easier to achieve. An article from Forbes last month is worth a look, as it details how the IRS may have lowered the bar for innocent spouse relief. Essentially, a new memorandum from the IRS has issued a set of eight factors to weigh for the determination of the need for spousal relief. With these new criteria (such as “economic hardship” and “nonrequesting spouses legal obligation”) the playing field is that much more level for spouses dragged into a sticky situation. If you (or someone you know) want to know more, check out the original article which provides more details on what relief is available and how to obtain it.

Reference: Forbes (January 29, 2012) “IRS Lowers Bar for Innocent Spouse Relief”

Indiana Death Tax Dies – Will Other States Follow?

The Indiana inheritance tax is officially on its way out the door. What does this mean for other states? For some taxpayers, wealth transfer planning has required two layers of tax consideration. First, the federal estate tax, which traditionally has received the lion’s share of attention and, second, “state” estate taxes or even “state” inheritance taxes. And, in some instances, those state taxes can be harsher than the federal estate tax (especially given the current federal estate tax exemption of $5.12 million per taxpayer)! Accordingly, the demise of another state wealth transfer tax is welcome news to many in Indiana. Might this signal a trend extending beyond the Hoosier state? This question is explored in a recent Forbes article titled Another State Death Tax Kicks The Bucket, Will More Fall?. As the author points out, this development in Indiana could buttress the argument for the repeal of such wealth transfer taxes in sister states and maybe even at the federal level. The states, after all, are always in constant competition with one another (for residents and businesses) and taxes are a constant give and take in the exchange. For more information on the Indiana laws and the politics involved, I recommend reading the original article.

Reference: Forbes (March 20, 2012) “Another State Death Tax Kicks The Bucket, Will More Fall?”

IRS Relaxes “Innocent Spouse” Relief Rules

Spouses filing taxes jointly make a very special commitment. Aside from being already committed to marriage, joint filing makes them jointly and severally liable for those taxes, or any problems. This can create a significant problem when one spouse runs afoul of the tax laws. Why? It can drag the other spouse into the matter, unless you can convince the IRS to grant “innocent spouse relief.” Luckily, what was once very tricky might now be much easier to achieve. An article from Forbes last month is worth a look, as it details how the IRS may have lowered the bar for innocent spouse relief. Essentially, a new memorandum from the IRS has issued a set of eight factors to weigh for the determination of the need for spousal relief. With these new criteria (such as “economic hardship” and “nonrequesting spouses legal obligation”) the playing field is that much more level for spouses dragged into a sticky situation. If you (or someone you know) want to know more, check out the original article which provides more details on what relief is available and how to obtain it.

Reference: Forbes (January 29, 2012) “IRS Lowers Bar for Innocent Spouse Relief”