CCA 1026033: Injured-spouse claims should receive the required disallowance notice

Plain-English summary

Chief Counsel advised that the IRS need not amend its Internal Revenue Manual because the manual already required issuing a Notice of Claim Disallowance in the injured-spouse case under review. The notice starts the two-year period under section 6532(a) for a taxpayer to file a refund suit, and Appeals may review a resubmitted Form 8379 when appropriate. The advice recommended issuing a partial disallowance letter promptly so taxpayers have procedural review before resorting to litigation.

Ruling snapshot

• Question: Should the IRS issue a Notice of Claim Disallowance and allow the applicable Appeals process for an injured-spouse claim?
• Outcome: advice given
• Key authorities: IRC § 6532(a); IRM 21.4.6.5.9.8; Wade v. United States, 865 F. Supp. 216 (D.N.J. 1994)

Full text (IRS public release)

ID: CCA_2010050616400553 Number: 201026033
Release Date: 7/2/2010
Office: --------- UILC: 6532.00-00

From: ---------------------
Sent: Thursday, May 06, 2010 4:40:06 PM
To: -------------------------------------------------
Cc: ----------------------------------------------------------------------------------------------------------------
Subject: RE: Injured spouse claim and 106(c) letter

Hi ------------ and --------:

We believe that there is no need to amend the IRM because the IRM currently requires
the issuance of the Notice of Claim Disallowance in this case.
According to IRM 21.4.6.5.9.8(2)(b),

     If IRS disagrees with the [injured spouse] claim (including the
     allocation), it issues a Notice of Disallowance starting a 2-year period
     under IRC § 6532(a) during which a taxpayer may file a tax refund
     suit.

Furthermore, the IRM provides for forwarding these cases to Appeals, when
appropriate.

     If the non-debtor spouse resubmits the Form 8379 with the required
     documentation for Appeals consideration during this period, AM
     [Accounts Management] may reconsider its rejection of the allocation
     before forwarding the new Form 8379 to Appeals. If AM accepts the
     resubmitted allocation it is unnecessary to forward the case to
     Appeals.

IRM 21.4.6.5.9.8.1(2)(b)

As noted in IRM 21.4.6.5.9.8(2)(b), above, issuing the Notice of Disallowance starts the
running of the statute of limitations under section 6532(a). Second, allowing Appeals to
review injured spouse cases helps to prevent costly and unnecessary litigation.

Historically, the processing procedure for Form 8379 has excluded the Appeals Office
entirely. See Wade v. United States, 865 F.Supp. 216, 218 (D.N.J. 1994).
Consequently, if the injured spouse disagreed with the Service’s determination
regarding his/her status as an injured spouse and/or the allocation of the refund, then
the taxpayer’s only remedy was to go to court. See Id. Wade demonstrates that
problems that can occur with such approach.
 2

In Wade, the taxpayer filed a form 8379, requesting her portion of a tax refund. The
Service Center in Holtsville, N.Y. denied her request. The taxpayer tried unsuccessfully
through correspondence with and telephone calls to various Service personnel to have
this decision reversed. However, since there was no formal appeals process, the
taxpayer had no choice but to file suit in district court.

Not only did the court rule in her favor, but it also awarded attorney fees because it
found the Service’s position to be “baseless . . . from the start of the litigation.” Id. at

220. In other words, the court made it clear that the Service should have “conceded”
     the validity of her claim before she ever filed her suit. Id.

Wade demonstrates the need for an appeals process to be available to taxpayers who
receive a notice of denial or partial denial of their injured spouse claim. An appeals
officer is trained to recognize those situations in which a taxpayer’s claim has merit as
well as those cases in which the Service has taken an indefensible position.
Consequently, the appeals process provided for in IRM 21.4.6.5.9.8 and IRM
21.4.5.5.9.8.1 should be adhered to by the Service Centers so as to reduce the number
of costly and unnecessary lawsuits brought against the Service.

This is not to suggest that the partial disallowance of the taxpayer's injured spouse
claim is baseless. Indeed, I am sure that it is not. However, the IRS has to allow the
taxpayer to have her procedural due process. As such, issue the partial disallowance
letter. -----------------------------------------------------------------------------------------------------------

---------------------------- I strongly recommend that you issue the disallowance letter as
soon as possible -----------------------------

If you have any other questions, or if I can be of further assistance, please contact me.

Regards,

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