The process of divorce often uncovers unexpected betrayals that can have devastating effects on the innocent spouse's life. Tax fraud, which includes acts such as falsifying tax returns and deliberately not remitting payment, is arguably one of the most of the most catastrophic of these betrayals. It may not sound like a big deal, initially; most of us have been audited by the IRS or owed a little extra tax due to a slight miscalculation in our returns. However, tax fraud that has gone on for years can add up to a staggering amount of unpaid taxes, including late fees and penalties.
It seems unfair to be held accountable for your spouse's actions, but the privilege of filing jointly is granted on the condition that you will be responsible for any liabilities associated with that return. There are, of course, plenty of marriages where one spouse is largely responsibility for taking care of the finances. Many spouses are used to just signing whatever is handed to them, or letting their partner take care of the taxes through online programs. While you should be responsible for the state of your finances, the IRS recognizes that it's unfair to punish those who were genuinely unaware of their spouse's actions. The IRS also makes concessions for individuals who are caught in the middle of mistakes that can generally be attributed to their spouse.
If the IRS is accusing you of tax fraud or errors that were committed by your spouse, you may seek Innocent Spouse Relief protection under one of the following categories:
- Innocent Spouse Relief: relief from tax owed due to your spouse's failure to report correct information, or fraudulent claims for deductions and/or credits.
- Separation of Liability Relief: relief from tax owed for a tax year in which you and your spouse/ former spouse were separated or divorced. The IRS will allocate the amount for which you are responsible, and not hold your liable if your spouse/ former spouse fails to pay.
- Equitable Relief: can only be requested if you do not qualify for innocent spouse or separation of liability relief. You must be able to show that the error or non-payment is mostly or solely attributable to your spouse.
There are additional conditions and strict deadlines associated with each type of relief, which you should discuss with a qualified attorney.. While most cases of tax fraud should be discussed with a tax attorney, innocent spouse relief involves individuals who are separated, divorcing, or have gone through a
divorce. Thus, it is highly recommended that you speak with a family law attorney, who can help you put together the strongest possible argument towards proving your innocence. Your lawyer's guidance is especially important if your marriage and/or divorce involves legal issues such as hidden assets and domestic violence. The attorneys of Villani & DeLuca, P.C. will be happy to advise you on these, and any other family law issues during a free initial consultation.