In many divorce and legal separation cases, there are allegations of fraudulent tax returns being filed by both or one of the spouses. This may lead to an increase in litigation if the income of one or both parties is at question, and their respective tax returns do not reflect their actual incomes. In the event, your spouse improperly reported items on your tax return you can request innocent spouse relief from the IRS which relieves you of the responsibility for paying tax, interest, and penalties. This process would be conducted outside of court, and you may request help from a tax lawyer or certified public accountant. If you are approved for the relief, the taxes, interests, and penalties would strictly be collected from your spouse. If declined for the relief, you are jointly and individually responsible for the consequences. In order to qualify for innocent spouse relief, you must meet all conditions.
When requesting the relief, you must establish that when you signed a joint return, you were unaware of the understatement of tax. If you had actual knowledge or reason to know of an erroneous item, you would be disqualified. Actual knowledge is defined as knowing of the understatement or a reasonable person in similar circumstances would have known the understatement. Reason to know is the IRS determining if you had a reason to know about the understatement by analyzing the nature of the erroneous item, financial situation between you and your spouse, educational background, business experience, whether you failed to ask about the erroneous item, and if the erroneous item represented a departure from a recurring pattern reflected in prior years.
Qualification is also determined by whether it would be unfair for you to be held liable for the understatement of tax. The IRS decides by considering if you received a benefit or significant benefit (any benefit in excess of normal support) directly or indirectly from the understatement, if your spouse deserted you, and if you and your spouse have divorced or separated.
The last qualification is that you and your spouse have not transferred property to one another to partake in a fraudulent scheme.
Partial relief can be granted if at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item. You will be relieved from that understatement if all other qualifications are met for that specific portion.
Any relief or responsibility owed due to fraudulent tax returns may affect your divorce or legal separation. For more information, call Kiswani Law, P.C. at 708-210-9247.