I knew my husband excluded income from our joint tax return, but he lied to me. Will the IRS still hold me responsible for unpaid taxes?
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UPDATED: Oct 19, 2011
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It is not sufficient to simply say that your husband lied to you regarding intentional omissions from a joint income tax return. Lack of knowledge regarding tax laws is also not a valid argument when trying to obtain relief from a tax deficiency arising from one spouse’s failure to include income or understate tax owed on an income tax return. It is also unacceptable to say that you were not aware of the tax consequences of failing to include income.
Most often, it is the husband who prepares and files the income tax return when couples are filing jointly. Every spouse has the burden to investigate when she suspects that the information the husband is providing her is incorrect. The IRS rarely grants innocent spouse relief, especially in situations where the primary argument is that the other spouse lied on an income tax return.
However, if the spouse seeking relief can prove that she did make an effort to inquire and was repeatedly lied to about the couple’s finances then the IRS can release a spouse from liability for a tax deficiency. In order to obtain a release from liability for a tax deficiency because of your spouse’s failure to include income, the IRS will look at several factors to determine whether you can also be held responsible for paying the additional tax and penalties.
1) Educational background and the ability to understand finances is a factor that will determine whether a spouse can be held liable for unpaid taxes. Those with a limited education and virtually no experience with handling the family’s finances will likely obtain relief, but those who are actively involved in managing the couple’s finances will find it much harder to convince the IRS that they are entitled to relief.
2) Spouses seeking relief must lack knowledge or experience with financial matters in order to be exempt from liability for unpaid taxes. Joint bank accounts and a wife’s knowledge of the husband’s income are factors that weight against a spouse seeking relief from liability. According to the IRS, having access to a joint bank account and knowing the sources of the spouse’s income provide enough reason for a spouse to know if a return is inaccurate or at the very least understand that there may be questionable items on an income tax return.
3) Being separated or divorced is a positive factor that works in favor of the spouse seeking relief, but marital status alone will not guarantee relief. The IRS looks at the complete picture of how the couple interacted during the marriage regarding their finances when deciding to release a one spouse from joint tax liabilities.