How innocent spouses are viewed by the IRS

Manassa & Neugebauer, P.C.

People seeking divorce want to move on and start a new life. This often means extinguishing old debts and escaping the financial problems that plagued the marriage. Unfortunately, some may still be snared in tax problems created by a former spouse. Essentially, an unsuspected spouse could be accused of tax fraud due to the dubious actions of a former spouse simply by signing a return that contained false information.

As a matter of law, the act of signing a joint return means that the signers knew of, or had reasonable knowledge of the information contained in the return. However, a number of spouses (mostly women) had no idea of how their finances were handled, and simply trusted their spouses to provide accurate information. As such, they were not necessarily compliant in committing tax fraud, and would petition the IRS for equitable relief (i.e. relief from joint tax liability).

In the past, equitable relief cases would lead to years of investigations and litigation to clear an innocent spouse’s name. However, the Internal Revenue Service (IRS) changed its stance last year in such cases, especially in situations where a spouse was abused. When spouses are subject to abuse (either physical or emotional), the IRS recognizes that they are generally not in a position to challenge the veracity of a return, or refuse to sign it. They may also have their signatures forged in an attempt to hide potential refunds, even though obtained through fraudulent means.

With IRS examiners having more discretion to review these circumstances, it is helpful to have an experienced attorney involved to gather all relevant facts and incorporate all possible defenses so that proper relief can be granted.

Source: New York Times “Innocent Spouses Get More Relief From IRS“, February 11, 2012

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How innocent spouses are viewed by the IRS