Have you discovered that your spouse has filed fraudulent items on your joint tax return? This creates a sticky situation for innocent spouses, who have to take immediate action to avoid being held responsible for this financial fraud. Fortunately, the IRS does have effective tools you can use to avoid the additional liability. The most common is called innocent spouse relief.
To increase your chances of being granted innocent spouse relief, consider how you may be able to prove a few key parts of your defense.
1. Your Mental Health. If you were suffering serious mental or emotional trauma — perhaps due to a deteriorating marriage or chronic health issues — the IRS may give you extra leeway in the rules stating that you are equally liable for what you sign. You might back up your claims of mental health issues with records from doctors or therapists during the times you filed jointly.
2. Your Physical Health. Just as emotional health problems can cause a person not to be in the right frame of mind to weed out fraud, physical health challenges can as well. Managing serious health issues (both ongoing and sudden types) saps emotional strength, mental prowess, time, and energy to handle other difficult tasks like tax return examination.
3. Domestic Violence. A spouse who suffered from any form of domestic violence is often recognized to be unable to do certain normal activities that others do. One of these may be to understand or have control over forms given them to sign.
4. Your Involvement. Was the tax fraud done within the confines of something that only one spouse had access to or controlled? If your spouse owns a business for which income was under-reported, you may have no involvement with the business management. This could also be the case if one spouse handled all the transactions for a joint rental unit or had bank accounts that the other didn't know about or have access to. You can, then, demonstrate that you had no knowledge of the fraud and had no reasonable way to know.
5. Good Faith Actions. If you hide the fraud or act in perpetuating it, the IRS isn't likely to grant you immunity. But it's different if you handle the fraud in a straightforward manner, attempt to follow the law as to your responsibility, and have complied with all other tax laws and regulations. These reflect good faith attempts to follow the law, and that is often recognized by the IRS when determining your liability for this issue.
Can you make use of any of these mitigating factors when claiming innocent spouse relief? The best way to approach this difficult subject is to work with a lawyer who specializes in resolving tax problems. Make an appointment today with a tax problem lawyer to see how best to use this valuable IRS tool to win the relief you need.