When a taxpayer applies for innocent spouse relief, they are not actually applying to have the tax liability abated; rather, they are applying to have the tax liability reduced to zero to prevent the IRS from pursuing collection activities against them.
Innocent Spouse Relief
This is an important distinction because the IRS has the ability to reverse the grant for relief if it is determined that the relief was inappropriately issued to the taxpayer. Because the liability has not been abated by the IRS, the reversal of transaction code 604(which reduces the taxpayer’s liability to zero) is not a new assessment and is not prohibited by the expiration of the statute of limitations on assessment.
The limitations period on collection under IRC Sec. 6502 runs from the original date of the assessment, adjusted for any suspension, which includes innocent spouse relief. This means that innocent spouse relief will extend the statute of limitations further into the future.