Where an Offer in Compromise is made by only one taxpayer where a joint tax return was filed, the OIC will not extinguish the liability of any person not named in the OIC who is jointly and severally liable for the tax to which the compromise relates. The IRS may proceed to collect the pre OIC amount of tax from the any person not named in the OIC.
When a taxpayer offers to compromise a liability for which the taxpayer’s spouse has no liability, such as a pre-nuptial tax liability or liability arising under a married filing separate return in a non community property state, the assets and income of the non-liable spouse are not considered in determining the amount of an adequate offer (RCP). However, this rule does not apply in situations where the taxpayer has transferred property to the nonliable spouse under circumstances that would permit the IRS to collect the taxpayer’s liability from the property, such as property that was conveyed in fraud of creditors (i.e. fraudulent conveyances).
When collection of the taxpayer’s liability from the assets or income of the nonliable spouse is permitted by applicable state law, as is common in community property states, the assets and income of the nonliable spouse are considered in determining the amount of an adequate offer (RCP). Consequently, the IRS will require collection information statements from both spouses in community property states.