Abstract
Cathy is a financially unsophisticated homemaker whose husband engaged in Medicare fraud in 1999, for which he was imprisoned the following year. Cathy had no involvement in the family's financial dealings, legal or otherwise, and was completely unaware of her husband's fraud. As aresult of the Medicare fraud, the couple owed an additional $900,000 in income taxes for the 1999 taxable year, which the IRS attempted to collect from Cathy and her husband in 2003. In the collections packet issued to Cathy, the IRS informed her of the availability of "innocent spouse" relief, whereby a spouse may be relieved from joint and several liability when thespouse meets certain requirements. Cathy, however, declined to elect innocent spouse relief because her incarcerated husband assured her that he would handle the matter. Cathy's husband died without having completed the necessary paperwork, and in 2006 the IRS resumed collection activities against Cathy. Cathy then claimed innocent spouse protection, but a Treasury regulation imposed a two-year deadline on such claims, and the IRS denied her relief.
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