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COVID-19: Relationships and Financial Pressures

Hana Boruchov, JD and Leo Gabovich, JD
Published Date:
May 1, 2022

Coronavirus (COVID-19) has been a pandemic that has affected many aspects of our daily lives. One of the unfortunate results of the major changes to our lifestyle and economic impacts has been a surge in separations and divorces worldwide. According to Legal Templates, a company that provides licensed attorneys in the United States with legal form templates, there was a 34% increase of sales of its divorce agreements in the first half of 2020 alone, as compared to 2019.[1] Subsequently, this has left many people in difficult situations relating to their finances and taxes resulting in an increased demand for innocent spouse relief as well as the Offer in Compromise program (OIC).

As tax professionals, we are aware that married taxpayers may elect to file jointly; statistically, 95% of married taxpayers do so.[2]  But what happens when a marriage breaks down and there is a tax liability that is jointly owed between spouses? Sometimes, agreements in place help resolve the issue, but more often than not one spouse is left paying the bulk of the liability.  Even when certain agreements are in place in a prenuptial or other marital contract, those agreements are civil in nature and the IRS and state tax government often disregard those agreements for tax purposes. Innocent spouse relief therefore is an extremely effective tool to absolve a requesting spouse of their spouse’s tax liability.

There are three different categories of innocent spouse relief: § 6015(b) relief for understatements of tax attributable to erroneous items on a return; § 6015(c) relief for a portion of an understatement of tax for taxpayers who are separated or divorced; and Commissioner discretion under § 6015(f) to grant equitable relief to taxpayers who do not qualify under § 6015(b) or (c).  To the extent that any tax, interest and penalties do not qualify under § 6015 for relief, the liability will remain joint and several.

In order to qualify for § 6015(b) relief, all of the following conditions must be met:

A. The taxpayers must have filed a joint return;

B. There must be an understatement of tax attributable to erroneous items of the non-requesting spouse;

C. The requesting spouse must not have actual knowledge or reason to know of the understatement of tax;

D. It must be unfair to hold the requesting spouse liable for the understated tax; and

E. The requesting spouse must have invoked subsection (b) within two years after the date the Commissioner began collection action.

The requesting spouse bears the burden of proof when invoking relief under § 6105.[3] Pursuant to federal tax regulations,[4] the reasonable person standard is applied to determine whether the requesting spouse had reason to know an understatement existed. Factors used to analyze whether a taxpayer had reason to know include (i) education; (ii) involvement in business and financial affairs; (iii) lavish or unusual expenditures compared to past spending patterns, levels of income and standard of living; and (iv) whether the culpable spouse was deceitful or evasive with finances.[5] Factors most often considered when determining whether it would be unfair to hold the requesting spouse liable for the deficiency include “whether there has been a significant benefit to the spouse claiming relief and whether the failure to report the correct tax liability on the joint return resulted from concealment, overreaching, or any other wrongdoing on the part of the other spouse.”[6]

To qualify for § 6105(c) relief, allocating liability to the requesting spouse’s respective liability, one of the following conditions must be met:

A. The electing spouse must no longer be married to or must be legally separated from the individual with whom the joint return was filed; or

B. The taxpayers who filed the joint return must not have been members of the same household at any time during the 12 months prior to the requesting spouse making the election.

Significantly, taxpayers who make an election under subsection (c) are not eligible for refunds of amounts already paid.[7]

To qualify for relief under subsection (f) of § 6015, the following conditions must be met:

A. Taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency; and

B. Relief is not available to such individual under subsections (b) or (c).[8]

Facts and circumstances that would help qualify a requesting spouse under this subsection may include: economic hardship,[9] the non-requesting spouse's legal obligation to pay the liability, knowledge or reason to know that the understatement would not be paid, whether the requesting spouse received a significant benefit, tax compliance history, history of abuse and the requesting spouse’s mental or physical health.[10]

If the requesting spouse is denied innocent spouse relief, separation of liability or equitable relief, at that point, the taxpayer may consider filing an OIC to reduce the liability. An OIC is an agreement between the IRS and the taxpayer where the IRS agrees to settle for less than the full amount due of tax, interest, and penalties.  

There are three reasons the IRS may allow for an OIC: doubt as to liability; doubt as to collectability; and effective tax administration. The IRS may accept an offer if there is doubt as to the liability. An OIC may meet this criterion when there is a genuine dispute as to the actual existence or amount of the correct tax debt under the law. A mere request is obviously insufficient, and additional documentation should be provided to the IRS to establish a favorable position. This may include items such as affidavits by the taxpayer or copies of e-mails, or contracts documenting the facts underlying the wrongful assessment.

Second, the IRS can accept a compromise if there is doubt that the amount owed is fully collectible. Doubt as to collectability exists in any case where the taxpayer's assets and income are less than the full amount of the tax liability. Not all taxpayers will qualify for doubt as to collectability for OIC. To determine eligibility, the IRS calculates what is known as the “reasonable collection potential” of taxpayers to evaluate whether they will qualify for an OIC. The reasonable collection potential consists of the taxpayer’s net equity in assets, at a reduced “quick sale” rate, and any future excess income after reasonable living expenses. Like a doubt as to liability OIC, documentation is required to establish a favorable position, in this case, financial documents such as past tax returns, current bank statements, and proof of current expenses above national standards, amongst others. Even an initial showing of a qualifying reasonable collection potential may be challenged by the IRS and be ultimately approved or denied by the office of appeals.

Finally, the IRS can accept a compromise based on effective tax administration. An offer may be accepted under effective tax administration even where the taxpayer’s reasonable collection potential wouldn’t qualify them for an OIC doubt as to collectability. This may mean the taxpayer could technically afford to repay the liability in full, either lump sum or via an installment agreement, but doing so would cause an undue economic hardship to them.  Otherwise, exceptional circumstances that either have a compelling public policy implication or equity considerations may provide a basis for an OIC under effective tax administration.  Needless to say, this form of OIC is much rarer than the other two, considering the circumstances required to be approved.

Whether due to a recent divorce or other hardships faced by people as a result of the COVID-19 pandemic, there are options out there to reduce or challenge tax liabilities. Having a qualified tax professional in your corner can mean the difference between successfully challenging a liability or struggling under the burden of tax debt.


Hana Boruchov, JD, Hana Boruchov, is a partner at Boruchov, Gabovich & Associates PC. She’s helped guide both individuals and corporations through the resolution of their federal and state tax controversy matters. A skilled negotiator, she’s facilitated the release of levies, liens, suspensions, and has saved her clients millions of dollars in tax, interest and penalties. Hana has facilitated the resolution of controversies involving liens, levies, warrants, seizures, penalty abatements, offers in compromise, income tax audits, installment agreements, responsible person assessments, trust fund recovery penalties, innocent spouse relief, New York State residency audits, New York State driver’s license suspensions, federal passport revocations, New York State sales and use tax audits and voluntary disclosures. Hana has served as Of Counsel to several law firms and corporations, advising on tax compliance and controversy issues. She can be reached at or 646-392-8840 ext 101.

Leo Gabovich, JD,
is a partner at Boruchov, Gabovich & Associates PC. He has leveraged his experience as a former New York State Tax Department litigator to represent individuals and businesses in income, sales tax and residency audits and appeals, as well as helping resolve outstanding tax obligations before the IRS in audits, appeals and collection matters. After graduating from Fordham Law, Leo Gabovich began his career as a litigator for the New York State Tax Department. As a litigator, he represented the State before the Division of Tax Appeals and the Tax Appeals Tribunal. After leaving the state tax department, Leo went on to join an international tax boutique law firm where he would represent clients in offshore voluntary disclosure matters, assisting high-net-worth individuals and royalty in repatriating tax funds to the United States in return for avoiding harsher penalties and potential prosecution. He then went on to bring his expertise of international taxation and compliance and state and local tax representation as part of the team at UHY Advisors, an international public accounting and professional services firm. He can be reached at or 646-392-8840 ext 102.




[3] See, Tax Court Rule 142; see also, Alt v. Commrr, 119 T.C. 306, 311 (2002), affirmed, 101 F. App’x 34 (6th Cir. 2004)

[4] 26 CFR 1.6015-2 (c)

[5] See, Price v. Commr, 887 F.2d at 965

[6] Taft v. Commr , T.C. Memo. 2017-66 * 9; Alt v. Commr, 119 T.C. at 314; Jonson v. Commr, 118 T.C. 106, 119 (2002), aff’d, 353 F.3d 1181 (10th Cir. 2003)

[7] 26 U.S.C. 6105(g)(3) (2017)

[8] 26 U.S.C. 6015(f) (2017)

[9] Tres. Regs. Sec. 301.6343-1(b)(4)

[10] See IRS publication Three Types of Relief at a Glance (

Views expressed in articles published in Tax Stringer are the authors' only and are not to be attributed to the publication, its editors, the NYSSCPA or FAE, or their directors, officers, or employees, unless expressly so stated. Articles contain information believed by the authors to be accurate, but the publisher, editors and authors are not engaged in redering legal, accounting or other professional services. If specific professional advice or assistance is required, the services of a competent professional should be sought.