The IRS is required by law to apply a taxpayer’s tax refund to any past-due Federal tax debt, child or spousal support debt, Federal agency nontax debt (such as a student loan), or State income tax obligation before issuing the refund.  If a taxpayer files a joint tax return resulting in a refund, that refund may be used to pay a past due amount of either spouse’s debts.

However, the IRS can refund all or a portion of the refund if the taxpayer qualifies as an injured spouse.  An injured spouse is a taxpayer who files a joint tax return for which all or part of his or her share of the tax refund was, or is expected to be, applied against the other spouse’s past-due debt.

The IRS closed a total of 730,956 injured spouse cases in Calendar Years 2014 and 2015.

In a final report issued May 19th of this year, the Treasury Inspector General for Tax Administration stated the following.

TIGTA’s review of a statistically valid sample of 100 injured spouse cases from the universe of 530,581 resolved from January 1, 2014, to May 28, 2015, identified that 91 (91 percent) of the cases were processed accurately.  However, 30 (30 percent) of the cases were not resolved within the required 45 days, which resulted in the unnecessary payment of interest.  The IRS took an average of 102 days from receipt to resolution of the cases, and as a result of not timely working the cases, paid interest in the amount of $506.  Based on these results, TIGTA estimates that the IRS may have paid interest in the amount of $2.7 million for 159,174 of the 530,581 injured spouse cases as a result of not timely resolving the cases.

TIGTA also found that the IRS did not update Form 8379, Injured Spouse Allocation, and its instructions to address a prior TIGTA recommendation for the IRS to ensure that guidance provided to taxpayers is current, complete, and accurate.  For example, instructions still do not inform taxpayers that a claim can be filed for prior years or that there is a six-year statute of limitations on filing a claim for nontax debt and a three-year statute of limitations for tax debt.

The IRS did address a prior recommendation to identify and revise all IRS documents containing injured spouse information to refer taxpayers to Form 8379 and its instructions for guidance.

TIGTA recommended that the IRS ensure that injured spouse cases are assigned to customer service representatives who have sufficient training, knowledge, and experience to resolve the cases.  In addition, TIGTA recommended that the IRS ensure that taxpayers are informed of the current statute of limitations the IRS applies when processing injured spouse cases and prioritize the work needed to update Form 8379 and its instructions.

The IRS agreed with all three of TIGTA’s recommendations.  The IRS stated it plans to ensure that all customer service representatives processing injured spouse allocations have sufficient training to resolve the cases.  In addition, the IRS plans to update its internal guidance and instructions provided to the taxpayers to reflect the current statute of limitations the IRS applies when processing injured spouse cases and take immediate action to update the Form 8379 and instructions upon receipt of clarifying guidance from its Office of Chief Counsel.