Divorce – Married Taxpapers Filed Joint Tax Return – IRS – Innocent Spouse

Helfand & Associates, matrimonial attorneys at 575 Route 10 East, Suite 1, Whippany, New Jersey, can assist you with identifying issues that can provide innocent spouse relief from taxes. Usually there are lower taxes if married spouses file joint tax returns. When parties divorce, if money is owed on prior joint tax returns, both parties and each spouse individually are liable for the full amount due to the Internal Revenue Service.

The Property Settlement Agreement is not controlling, as the debt is between the spouse and the IRS not between each other. If all or most of the income was earned by one spouse, if money is owed, the non-earning spouse who filed and signed the joint tax return can still be liable for any taxes due.

There is a provision for relief from this burden if you qualify. You must meet all of the following conditions to do so:

  1. you filed a joint tax return with the IRS which has a substantial understatement of tax directly related to grossly erroneous unreported taxable income or the incorrect tax deductions, tax credits or tax basis of your spouse. Unreported taxable income is any gross taxable income item received by your spouse that is not reported on the tax return to the IRS. Incorrect tax deductions, tax credits or tax basis are any tax deductions, tax credits or tax basis of property claimed by your spouse on the tax return filed with the IRS for which there is no basis in fact or tax law.
  2. you establish at the time you signed the joint tax return and filed it with the IRS you did not know, and had no reason to know, that there was a substantial understatement of income or tax.
  3. Taking into account all the facts and circumstances, it would be unfair for the IRS to hold you liable for the understatement of tax.

There is a form called Request for Innocent Spouse Relief that one would have to fill out and submit to the IRS. It requests information about your level of education completed when the returns were filed. It asks if you were the victim of domestic violence and requires proofs. You have to explain large expenses such as trips, home improvements, private schools, automobiles, appliances, and jewelry. The form clearly asks for information which helps the IRS assess why you were an innocent spouse. Obviously a well-educated person who has made large expenditures could not be an innocent spouse if the reported income is less than the expenses and lifestyle costs.

Helfand & Associates in Whippany, New Jersey, is familiar with circumstances in which a spouse can be burdened with unfair tax due.

There are instances in which a spouse does not actively participate in the family finances or taxes. It is important for both spouses to review the tax returns before they are signed. The IRS form asks for an explanation as to why a spouse did not review the tax returns he/she signed and there will need to be a reasonable statement. If you were not involved in the household finances, you will need a reasonable explanation to be deemed an innocent spouse.

The IRS will consider if you received a benefit from the understated tax, whether your spouse deserted you, whether you have been divorced or separated, and whether there have been fraudulent transfers to avoid tax.

By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse or former spouse improperly reported or omitted items on your tax return.

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