How does an ex-wife prove she will suffer economic hardship if equitable relief is not granted.
For purposes of this factor, an economic hardship exists if satisfaction of the tax liability in whole or in part will cause the ex-wife (hereinafter, the “Requesting Spouse”) to be unable to pay reasonable basic living expenses. Whether the Requesting Spouse will suffer economic hardship is determined based on rules similar to those provided in 26 C.F.R. § 301.6343-1(b)(4), and the IRS will take into consideration a Requesting Spouse’s current income and expenses and the Requesting Spouse’s assets. In determining the Requesting Spouse’s reasonable basic living expenses, the IRS will consider whether the Requesting Spouse shares expenses or has expenses paid by another individual (such as a family member, including a current spouse). If denying relief from the joint and several liability will cause the Requesting Spouse to suffer economic hardship, this factor will weigh in favor of relief. If denying relief from the joint and several liability will not cause the Requesting Spouse to suffer economic hardship, this factor will be neutral.
In determining whether the Requesting Spouse would suffer economic hardship if relief is not granted, the IRS will compare the Requesting Spouse’s income to the Federal poverty guidelines (as updated periodically in the Federal Register by the U.S. Department of Health and Human IRSs under the authority of 42 U.S.C. § 9902(2)) for the Requesting Spouse’s family size and will determine by how much, if at all, the Requesting Spouse’s monthly income exceeds the spouse’s reasonable basic monthly living expenses. This factor will weigh in favor of relief if the Requesting Spouse’s income is below 250% of the Federal poverty guidelines, unless the Requesting Spouse has assets out of which the Requesting Spouse can make payments towards the tax liability and still adequately meet the Requesting Spouse’s reasonable basic living expenses. If the Requesting Spouse’s income exceeds 250% of the Federal poverty guidelines, this factor will still weigh in favor of relief if the Requesting Spouse’s monthly income exceeds the Requesting Spouse’s reasonable basic monthly living expenses by $300 or less, unless the Requesting Spouse has assets out of which the Requesting Spouse can make payments towards the tax liability and still adequately meet the Requesting Spouse’s reasonable basic living expenses. If the Requesting Spouse’s income exceeds 250% of the Federal poverty guidelines and monthly income exceeds monthly expenses by more than $300, or if the Requesting Spouse qualifies under either standard but has sufficient assets to make payments towards the tax liability and still adequately meet the Requesting Spouse’s reasonable basic living expenses, the IRS will consider all facts and circumstances (including the size of the Requesting Spouse’s household) in determining whether the Requesting Spouse would suffer economic hardship if relief is not granted.