Did an IRS innocent-spouse determination automatically eliminate a Nebraska joint income-tax liability?

Plain-English summary

Nebraska did not provide a statutory innocent-spouse remedy matching the federal process. A final IRS innocent-spouse determination could instead support an offer to compromise a delinquent Nebraska income-tax account.

Relief was not automatic. The Department could consider a settlement where an offer in compromise was otherwise appropriate, including older unresolved accounts, hardship cases, and taxpayers who were retired or had limited income.

How to request consideration

The taxpayer submitted a written settlement offer stating the proposed amount and the amount of IRS innocent-spouse relief. The taxpayer also provided copies of the IRS preliminary and final determination letters.

If the Department approved the offer, it sent a letter of acceptance.

Relief the GIL did not cover

IRS Form 8857 also covers separation-of-liability relief, community-property relief, and equitable relief. The GIL said Nebraska did not consider settlements based on those other categories.

Common questions

Q: Did an approved IRS Form 8857 bind Nebraska?

A: No. It could support a discretionary Nebraska settlement, but did not automatically remove the state liability.

Q: Was a preliminary IRS letter enough?

A: The GIL required both the preliminary and final determination letters with the written offer.

Q: Did Nebraska recognize federal equitable relief through this process?

A: No. The GIL limited consideration to IRS innocent-spouse relief and excluded the other Form 8857 categories it identified.

Q: What happened after approval?

A: The Department issued a letter accepting the settlement offer.

Citations and references

• Neb. Rev. Stat. §§ 77-2792(3) and 77-3907(2) — compromise authority
• 316 Neb. Admin. Code, ch. 36, § 017.01 — delinquent-account settlements
• IRS Form 8857 — Request for Innocent Spouse Relief
• Nebraska GIL 24-19-2 — state settlement consideration after federal innocent-spouse relief

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/general-information-letters-gils
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/GIL24-19-02_Innocent_Spouse_Relief.pdf

Original ruling text

GIL 24-19-2 Income Tax: Innocent Spouse Relief
This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (DOR)
until amended. A guidance document does not include internal procedural documents that only affect the internal
operations of DOR and does not impose additional requirements or penalties on regulated parties or include
confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If
you believe that this guidance document imposes additional requirements or penalties on regulated parties, you
may request a review of the document.
This guidance document may change with updated information or added examples. DOR recommends you do
not print this document. Instead, sign up for the subscription service at revenue.nebraska.gov to get updates on
your topics of interest.

                                    August 6, 2019

Dear XXXX,
Guidance has been requested from several taxpayers about whether the Nebraska Department of
Revenue (DOR) allows innocent spouse relief for Nebraska individual income tax liability, consistent
with the IRS innocent spouse relief for federal income tax liability. This issue arises frequently when a
taxpayer successfully obtains an innocent spouse relief determination from the IRS, and then attempts
to obtain similar relief from Nebraska when the taxpayer receives a balance due.
GILs address general questions; provide analysis of issues; and direct taxpayers to the Nebraska statutes,
Department regulations, revenue rulings, or other sources of information to help answer a question. A
GIL is a statement of current DOR policy, and taxpayers may rely on DOR to follow the principles or
procedures described in a GIL until it is rescinded or superseded. You may also find current regulations,
revenue rulings, information guides, taxpayer rulings, and other GILs at revenue.nebraska.gov that may
be helpful to you.
The IRS allows a taxpayer to apply for relief from federal income tax liability, termed “innocent spouse
relief” using the IRS Form 8857, Request for Innocent Spouse Relief. This relief may be obtained
when a spouse believes they should not be liable for a joint liability resulting from filing a joint return
where the liability is due to understated tax attributable to erroneous items, of which the spouse had
no knowledge. Upon application, the IRS will issue a preliminary determination letter and a final
determination letter if the request is approved.
The Nebraska Revenue Act does not specifically provide for Innocent Spouse Relief; however, under
Neb. Rev. Stat. §§ 77-2792(3) and 77-3907(2), the Tax Commissioner has authority to compromise
outstanding liabilities. In circumstances where an offer in compromise may otherwise be considered,
DOR may agree to a settlement of a delinquent tax account under 316 Neb. Admin. Code, Ch. 36 § 017.01
where a taxpayer has received a final determination of IRS Innocent Spouse relief. Offers in compromise
sought based on IRS Innocent Spouse relief, may be considered in circumstances such as older
unresolved accounts, hardship cases, and retired or limited income taxpayers. To request relief due to an
Innocent Spouse situation, a taxpayer should make an offer of settlement to DOR, in writing, indicating
the settlement offer and the amount of IRS Innocent Spouse relief. The taxpayer should also submit a
copy of the IRS preliminary and final determination letters. If the offer is approved, DOR will send the
taxpayer a letter of acceptance.

GIL 24-19-2

Page 2 of 2

Please note that although Form 8857 is titled “Request for Innocent Spouse Relief, it is used not
only to apply for the specific innocent spouse relief, but also to apply for “separation of liability
relief”, “community property relief”, and “equitable relief”. Taxpayers should be aware that DOR
does not consider settlements based on these other types of IRS relief.
For the Tax Commissioner

                        Jeneé Y. Saffold, J.D.
                        Attorney, Policy Section
                        Nebraska Department of Revenue