The IRS has made recent changes to the ‘Innocent Spouse Relief’ program (for more details see our previous article). Given the reforms that are taking place, the professional accountants at AG Tax think that a general understanding of the Innocent Spouse Tax Relief program would be helpful for those who are applying for the first time and/or those who are considering applying.
If an individual was not aware of the financial activities of their spouse and how he/she was understating (or underpaying) their taxes, they may qualify for innocent spouse tax relief. However, in order to qualify, one must be informed about the IRS ‘Conditions & Guidelines’ to qualify for the Innocent Spouse Tax Relief program.
Conditions to Qualify for Innocent Spouse Relief:
• You must have filed a joint return which has an understatement of tax
• The understatement of tax must be due to erroneous items of your spouse
• You must establish that at the time you signed the joint return, you did not know, and had no reason to know, that there was an understatement of tax
• Taking into account all of the facts and circumstances, it would be unfair to hold you liable for the understatement of tax
• Be prepared to have solid evidences to prove to the IRS that you meet all of the above conditions
The three types of spouse relief:
Full Innocent Spouse Relief : When Full Innocent Spouse Relief is granted, the requesting spouse is relieved from the full tax liability, penalties and interests.
Separation of Liability Relief : In this case, the taxes owed are divided between the spouse who improperly filed the returns and the unaware husband/wife. The taxpayer who receives this relief owes a tax bill, but it will not be related to the incorrect information filed by his or her spouse. After the liability is separated, the innocent spouse is no longer responsible for the partner’s portion of the tax debt.
Equitable Relief : If the requesting spouse is not eligible for either the full innocent spouse relief or separation of liability, but the IRS feels that it would be unfair to hold the applicant liable for the understated or underpaid taxes, he/she may still be granted relief under this section of the program.
When you file for Innocent Spouse Relief, the IRS will send you a questionnaire for the purpose of verifying the validity of your story. If you find yourself facing this situation, it is strongly advised that you seek professional guidance.
AG Tax LLP Can Help
AG Tax can help you with the step by step filing process and the required disclosure of your financial information when requesting Innocent Spouse Relief.
Additionally, if you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of U.S. and Canadian tax laws as well as cross-border compliance.
As a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- State Sales Tax & E-commerce Taxation
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.