Many married taxpayers elect to file a joint tax return. The filing of a joint tax return offers certain benefits, namely a lower tax rate. However, both taxpayers are each equally responsible for the tax reflected on the tax return, plus penalties and interest. Further, both taxpayers are equally responsible for additional tax liability in the event of an audit. Even where one spouse earns all of the income and the tax is solely attributable to that spouse, the other spouse is equally liable for all of the tax liability if a joint tax return is filed. In cases where one spouse is responsible for underreported income or a bad deduction, both spouses are responsible for the resulting tax liability on a joint tax return.
The typical innocent spouse case is as follows: the husband is self-employed and is often paid in cash. The husband does not report all of his income on the joint tax returns. Further, the wife is unaware of this unreported income and did not benefit from it. The couple later separates or divorces. The divorce decree often does not address any tax matters. The husband cannot be found and the IRS is not interested in going after him. The IRS later discovers the unreported income, assesses additional tax liability and attempts to collect from the taxpayer that is the easiest to find.
Case study Deceased Spouse Leaves Surprise IRS DebtIn this case study, our taxpayer’s husband was killed in an auto accident. In the wreckage, the wife discovered a briefcase full of IRS notices. Until that moment, she did not know that they had an IRS problem. She immediately retained Patrick T. Sheehan & Associates who was able to obtain innocent spouse relief for her. Despite the devastating changes to her life caused by her husband’s death, she can now move forward knowing that she is free of any IRS problems.
There are different types of innocent spouse relief that are available, including separation of liability or equitable relief. A discussion of each type of relief is set forth below:
Chicago tax lawyers Patrick T. Sheehan & Associates, Attorneys at Law, P.C., has successfully negotiated many innocent spouse cases with the IRS since its inception in 1991. If you believe that you are an innocent spouse, please call us. We can help. Call Us Before the IRS Calls You!®