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IRS extends deadline for 'innocent spouse' tax relief application

WASHINGTON (Reuters) - Moving to help victims of domestic violence and others, the U.S. Internal Revenue Service on Monday proposed rules to extend the amount of time taxpayers can apply for its "innocent spouse" relief program which stops collection of taxes in certain situations.

The program aims to assist taxpayers - including single mothers - who have filed tax returns as married couples but later face a tax bill. The applicants are usually people who did not know their spouse had accumulated a tax liability, which the "innocent" spouses are also responsible for as part of a married tax filing.

Under the proposed rules, taxpayers would have up to 10 years to apply for the program and stop a tax collection process. Nearly 50,000 people apply annually for the program, including some involved in domestic disputes or physical abuse.

In 2011, the IRS said it would stop enforcing a two-year deadline to file an innocent spouse relief application. Monday's proposals would make the 10-year deadline permanent in law.

The tax-collecting agency was criticized by members of Congress for not giving abused spouses enough time to file an application for relief from tax debt accumulated by their partner without their knowledge.

Many people who apply for the program are mothers "with kids after the husband runs out on them," said Don Williamson, executive director of American University's Kogod Tax Center.

As a tax accountant, Williamson said he has represented taxpayers who have taken part in the program. Under the latest IRS rules, he said, they would have more time to make a claim.

The proposed rules would also stop the IRS from demanding unpaid taxes while an application is being processed. The proposed rules will be open for public comment for 90 days. It was unclear when the rules would be finalized.

The IRS has yet to propose formal rules spelling out who qualifies for the program and who does not.

(Reporting By Patrick Temple-West; Editing by Kevin Drawbaugh and Cynthia Osterman)

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