There are many bases for abating taxes and assessed tax penalties, including “Innocent Spouse” determination, explains Berkshire Tax Resolution. Typically, adjustment/abatement is a means for reducing or deferring a liability which is used in conjunction with another tax relief method to resolve the taxes owed. Berkshire Tax Resolution would like to point out that there are three types of Innocent Spouse relief: traditional Innocent Spouse relief, separation of liability, and equitable relief. Berkshire Tax Resolution would like to shed light on the fact that Traditional Innocent Spouse relief is granted to join-filers (typically married couples) when one spouse was unaware of the erroneous item which created a tax liability; Separation of liability is primarily for join-filers who are currently separated, and equitable relief is for a spouse who should not be held liable and who fails to meet the two preceding determinations. In each Innocent Spouse determination, the non-electing spouse/partner will be notified and may participate in the proceedings, explains Berkshire Tax Resolution.

Berkshire Tax Resolution would like you to know that in all of the Innocent Spouse adjustments, the IRS’ goal is to provide relief to the spouse who was unaware or not at fault for the creation of a tax liability; hence the IRS rules that it would be inequitable to hold the innocent spouse liable for any tax deficiencies, explains Berkshire Tax Resolution.

Berkshire Tax Resolution informs readers that an individual will be relieved of liability for income tax (including interest, penalties and other amounts) for a tax year to the extent the tax liability is attributable to an understatement (understatement and tax deficiency are synonymous) described below:    

1.  A joint return was filed for the tax year [IRC §6015(b) (1) (A)];     

2.  There is an understatement of tax on the return that is attributable to  
          an erroneous item by the other spouse [IRC §6015(b) (1) (B)];    

3. A taxpayer / spouse establishes that in signing the return he/she did not  
         know and had no reason to know of the understatement; [IRC §6015(b) (1) (C);]    

4. Taking into account all of the facts and circumstances, it would be  
          inequitable to hold the taxpayer / spouse liable for the deficiency  
          attributable to the understatement; [IRC §6015(b) (1) (D)]; and     

5. A taxpayer / spouse elects the benefits of this provision, on the form that  
          the IRS prescribes (Form 8857) , no later than the date that is two years  
          after the date the IRS has begun collection activities with respect to the  
          taxpayer. [IRC §6015(b) (1) (E)]

Berkshire Tax Resolution points out that ff an individual / spouse who otherwise qualifies for innocent spouse relief fails to establish that he/she did not know or have reason to know of the understatement, but does establish that he/she did not know or have reason to know the extent of the understatement, that individual / spouse may be relieved of liability for tax, penalties and interest to the extent that liability is attributable to the portion of the understatement that he/she did not know or have reason to know, clarifies Berkshire Tax Resolution. 

Berkshire Tax Resolution would like you to be aware that The Act also provides a separate liability election for a taxpayer / spouse who, at the time of the election, is no longer married to including widowed, is legally separated from, or has been living apart for at least 12 months from the person with whom the taxpayer / spouse originally filed a joint tax return. 

Berkshire Tax Resolution finds it beneficial for you to know that an individual / spouse is eligible to make the separate liability election only if at the time the election is filed he/she is no longer married to including widowed, or is legally separated from, the spouse from whom the joint return to which the election relates was filed; or he/she was not a member of the same household as the spouse with whom the joint tax return was filed at any time during the twelve month period ending at the date the election is filed [IRC §6015(c)(3)(A)(I)].    

The new innocent spouse rules focus mainly on tax "deficiencies," as opposed to balances shown as due on joint returns but simply never paid, explains Berkshire Tax Resolution. One portion of the new rules offers at least the hope of some relief for any balance due with respect to a joint return, even when relief would not be other-wise available. Specifically, new §6015(f) permits the IRS to waive "any unpaid tax or deficiency (or any portion of either)," if in light of all the facts and circumstances "it is inequitable to hold the individual liable." The IRS was directed to adopt implementing rules, which it did on January 31, 2000, when it issued Rev. Proc. 2000-15. Berkshire Tax Resolution would like you to know that The Rev. Proc. contains two items which warrant close review. First is a list of "threshold conditions" which must be satisfied by all claims for equitable relief, and the second is a list of conditions "under which relief under §6015(f) will ordinarily be granted."