Innocent Exes Afforded Same Protection As Innocent Spouses

When spouses file joint tax returns, each spouse may be liable for the tax debt of the other. If the tax return is filed fraudulently, both taxpayers may be on the hook for the proper amount, as well as interest and penalties assessed by the IRS.

What if one spouse was not aware that the other was filing taxes fraudulently? After all, it is not uncommon for one spouse to “do the taxes” in the family, and the other spouse merely signs. The IRS does acknowledge the existence of the “innocent spouse” and exempts such a spouse from responsibility for the debt. However, the spouse claiming innocence must be able to show either lack of knowledge or lack of participation in the fraudulent scheme, or prove that he or she was somehow coerced into signing the tax return.

Historically, innocent spouse status had to be claimed within two years of the commencement of the collection action by the IRS. This statute of limitations often worked against ex-spouses, who may have been a signatory on the joint return in question but since divorced. It is not likely for the ex-spouse to even know about a collection action initiated by the IRS against the former spouse until the two-year time limit has already passed, and a tax bill has come due.

To resolve this inequity among divorced spouses, as well as abused spouses and others who are married but having their spouse’s tax dealings hidden from them, the IRS in July rescinded the two-year rule.

If you were denied innocent spouse status in the past, or if you have other questions regarding taxation and other financial issues in your divorce, contact Lana Hawkins, Attorney at Law, at The Hawkins Law Firm, a family law attorney in Guntersville, Huntsville, and Arab, Alabama experienced in the impact of taxation, finances and other matters on divorce.