Innocent Spouse Relief

The IRS has special laws that apply to family members. Depending on how taxes are filed married couples can be jointly responsible for any tax problems caused by either spouse.

Issues are often discovered later in life, sometimes years after a divorce. Regardless, the IRS will chase both partners for fraud committed by just one of them. Often the non-offending family member will be in a better financial position, making them an even bigger target.

An innocent spouse will carry the burden of proving beyond doubt they had no part in the offense. That’s a difficult task, especially if you need to go back in time for evidence.

Daily & Toups is a specialized tax law firm. We can help you claim your innocence through a specially established procedure called the “Innocent spouse rule”.

Contact us for a free consultation. We’ll review your case and determine what options are available and how to move forward.

Joint and separate tax returns

It’s important to understand how your taxes are being handled

Typically, every person is responsible for their own tax return, taking full liability for any problems related to inaccuracy and fraud.

Married couples have the option to file their taxes jointly – as a family. Depending on the case and state, there may be benefits to filing jointly or separately. Usually, you will pay less if you file a joint tax return, especially in states with community property (Texas, Arizona, etc). Thus, many families opt to file their taxes jointly.

However, the laws also mandate that each spouse is 100% liable for their joint tax return. If one partner cheats on their taxes, the IRS will hold both responsible.

Usually, fraud is not discovered immediately. Years can pass and the couple may no longer be living together. However, the IRS is only interested in recovering lost revenue – if your name is on the tax return, they will come knocking.

Imagine the surprise of going to the bank, only to be notified there is a lien on your name for tax fraud committed by your ex-spouse five years ago. Suddenly, you owe the IRS tens of thousands of dollars for something you never took part of. And, there are official documents with your name and signature. The burden of proof lies entirely with you.

Fortunately, the IRS has established a procedure that allows family members to resolve such situations.

Innocent Spouse Rule

The Innocent Spouse Rule foresees that one taxpayer on a joint tax return can commit tax crime without the explicit knowledge and approval of the other.

Thus, you can prove your innocence by proving beyond any doubt that:

All fraudulent items on a joint tax return belong to your partner.

You had no knowledge or reasons to suspect the misconduct.

It would be unfair to suffer the consequences that are not a result of your own actions.

The above applies for any tax debts incurred after July 22, 1998, when IRS legislation received a major overhaul. For cases prior to the date, it’s more difficult to prove a spouse was innocent if they filed their taxes jointly.

You need to file IRS Form 8857 to claim innocent spouse relief. Upon reviewing your case, the IRS can agree and take the charges off your name. The IRS can give you a partial pardon, allowing you to file a separate tax return that only includes your income and liabilities.

They will still hunt down the responsible spouse and if you’re still married or jointly own a property, you can still be affected by the consequences.

The IRS can also deny your claim if they can prove you had known how the taxes were being handled and you also benefited from the fraud.

In this case, your only option is the tax court. You must file your case within 90 days of the date on the rejection letter. The IRS cannot take action against you during the legal proceedings. Of course, there is no guarantee the court will overrule the IRS decision. And, aside from disgruntling the agency further, you will also have to pay the court fees.

It’s a delicate situation!

As you understand, even though the IRS offers a procedure to prove your innocence, you will still be pressed hard to provide sufficient evidence.

Especially in cases involving large sums of money, it’s not recommended to represent yourself, as mistakes can cost you the limited chance of clearing your name.

At Daily & Toups, we’ve worked on hundreds of cases involving innocent spouse relief. With more than 50 years of experience, we have in-depth knowledge of internal IRS practices.

Contact us for a free, non-binding chat about your taxes. We will review your case and identify the most feasible solution. Then, we can proceed with preparing the necessary evidence and filing the correct paperwork.

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Richard | Multiyear tax audit defense

Thank you. Thank you. You got the tax lien removed and I was able to get my home re-financed.

Stephan | Removal of erroneous federal tax lien

Two years ago my finances (and life) were a mess. The IRS was on my back with tax levies of my bank accounts. Today, all of that is behind me. I can sleep at night.

Seraphina | IRS debt reduced from $200,000 to $14,700

The accountant that you warned me against tried to create endless fear as an incentive to hire him. You then helped me through the process of getting back into the tax system and not worry.

Sharon | 12 years non-filing of tax returns

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