Raising Innocent Spouse Relief in a Collection Due Process Hearing or a Deficiency Case

Most people think of innocent spouse relief as a stand-alone request: you file Form 8857, the IRS decides, and you go to the Tax Court if you disagree. That is one route. But spousal relief also comes up inside two other proceedings you may already be in: a collection due process hearing and a Tax Court case over a notice of deficiency. Knowing how to raise it there can protect your rights, and failing to raise it can cost you them.

Route one: the collection due process hearing

What the statute says

When the IRS sends a notice of intent to levy under section 6330 of the Internal Revenue Code, you generally have the right to request a collection due process hearing before the IRS Independent Office of Appeals. Section 6330(c)(2)(A) lists issues you may raise at the hearing, and the first one on the list is "appropriate spousal defenses."

Section 6320 provides a similar hearing right after the IRS files a notice of federal tax lien, and section 6320(c) makes subsection (c) of section 6330 apply to those hearings. So spousal defenses can be raised at a lien hearing too. Treasury Regulation 1.6015-5(b)(3) confirms that a request for relief may be made pursuant to the CDP hearing procedures under section 6320 in connection with the filing of a lien notice.

How the IRS handles a "combo" case

The Internal Revenue Manual, at IRM 8.7.12.13, explains that when a spouse requests innocent spouse relief before, during or after the IRS receives the CDP hearing request on Form 12153, the case becomes a combination case that requires coordination of the CDP and innocent spouse issues. The IRM says that the consideration of the innocent spouse request, including the nonrequesting spouse's right to participate, does not change because it arises in a CDP case.

The same section describes the workflow: the IRS innocent spouse unit makes the preliminary determination, an Appeals officer considers any appeal of that preliminary determination, and the Settlement Officer handling the CDP case suspends the CDP determination until the innocent spouse determination is made. IRM 8.7.12.13.1 adds that for a joint CDP request, the hearing can proceed for the nonrequesting spouse, but the final CDP determination for the requesting spouse waits for the innocent spouse decision.

What you cannot do

IRM 8.7.12.13 says a spouse cannot raise innocent spouse relief in a CDP hearing if the IRS has already made a final innocent spouse determination in a notice of deficiency or final determination letter, or if the Tax Court has entered a decision on the innocent spouse issue. It cites Treasury Regulation 301.6330-1(e). In other words, the CDP hearing is not a second bite at an apple you have already eaten.

Why the CDP route matters

A section 6330 notice is itself collection activity that starts the two-year clock for innocent spouse relief and separation of liability under Treasury Regulation 1.6015-5(b)(2). So the same letter that gives you a hearing right also starts your deadline. Raising spousal relief in the hearing, and filing Form 8857, puts the issue on the record right away. The guide to the two-year deadline explains the timing.

Filing your request also triggers the levy restriction in section 6015(e)(1)(B) for the covered assessment. The guide to collection while a claim is pending explains what that protects.

Practical steps

1. Note the date on the levy or lien notice. The hearing request deadline is printed on it.
2. Request the hearing on Form 12153 and identify spousal defenses as an issue.
3. File Form 8857 for the same years, following the current instructions.
4. Tell the Settlement Officer that you have filed, and keep proof.
5. Prepare for the nonrequesting spouse to be notified and to participate.

Route two: the Tax Court deficiency case

When it applies

If the IRS audits a joint return and issues a notice of deficiency, you have a limited time, stated in the notice, to petition the Tax Court to contest the deficiency. That case is about whether the additional tax is correct. But it is also a place to raise innocent spouse relief.

What the Form 8857 instructions say

The instructions are direct: if you received an IRS notice of deficiency, you should also file a petition with the Tax Court before the end of the 90-day period explained in the notice, and raise innocent spouse relief as a defense to the deficiency. They explain why: doing so preserves your rights if the IRS cannot properly consider your Form 8857 before the end of that period, and the time for filing with the Tax Court is not extended while the IRS considers your request.

The instructions also recommend including in your petition the information that supports your position, including when and why you filed Form 8857.

The res judicata trap

This is where the deficiency case route becomes essential, not optional. Section 6015(g)(2) and Treasury Regulation 1.6015-1(e) bar relief for a year in which a court rendered a final decision on your liability if section 6015 relief was at issue, or if you meaningfully participated in the case and could have raised it.

So if you and your spouse petition the Tax Court on the deficiency, and you participate meaningfully, but you never raise innocent spouse relief, you may lose the right to raise it later. The guide to bars to innocent spouse relief covers this in more depth.

Contest the deficiency and claim relief

You do not have to choose between arguing the IRS is wrong about the tax and arguing you should not have to pay it. You can do both. If the IRS is right about the additional income, innocent spouse relief may still keep it off your account. If the IRS is wrong, the deficiency shrinks for both of you.

A side-by-side look

Here is how the routes compare in practice.

• Stand-alone request. You file Form 8857. The IRS decides. You can petition the Tax Court under section 6015(e) within 90 days of the final determination, or after six months without one.
• CDP hearing. You request a hearing after a levy or lien notice and raise spousal defenses under section 6330(c)(2)(A). The innocent spouse request is decided under the same section 6015 procedures, coordinated with the hearing.
• Deficiency case. You petition the Tax Court on a notice of deficiency and raise section 6015 relief as a defense, alongside any challenge to the deficiency itself.

In each one, the same substantive tests apply: the requirements of section 6015(b), the allocation and actual knowledge rules of section 6015(c), and the Revenue Procedure 2013-34 factors for section 6015(f). What changes is the procedure, the timing, and what happens if you stay silent.

A note on the nonrequesting spouse

In both the CDP setting and a Tax Court case, your former spouse has participation rights. IRM 8.7.12.13 preserves the nonrequesting spouse's right to participate when the request arises in a CDP case, and in a Tax Court case section 6015(e)(4) and Tax Court Rule 325 give the other spouse notice and a right to intervene in a stand-alone petition. Plan for your former spouse's version of events.

Which route is right for you

Often it is not a choice. If you are in a CDP hearing, raise spousal defenses there. If you have a notice of deficiency, petition the Tax Court and raise innocent spouse relief there. In either case, file Form 8857 as well, so the request is formally made under the regulations.

If you are in neither situation yet, the stand-alone route under section 6015(e) is available. The guide to petitioning the Tax Court after a denial covers that process.

The takeaway

Whatever proceeding you are in, raise spousal relief there, and file Form 8857 too. Silence is the one choice that can cost you the issue entirely.