In the last post, Five Deadly Sins in the Eyes of the Taxman, I talked about how easy it is for innocent people to find themselves in the crosshairs of the tax man. You just have to commit the deadly sin of marrying and trusting the wrong person. However, because the tax code was written at a time when most married women worked from home and weren’t considered smart enough to understand finances, there was a provision added that allows a spouse to claim relief from a shared tax debt. All they have to do is prove their incompetence.
As you can imagine, it’s changed over the years.
In 1986 there were three “requirements” that had to be met before the tax review board would even consider an appeal. On the surface they sound relatively straight forward but they’re not. And the tax man is very strict about these requirements – if they don’t think you’ve satisfied all three, your appeal will go unanswered.
- The first condition is that you filed a joint tax return with your spouse for the year in question. If you filed separately thinking you’d be in the free and clear should your husband’s shenanigans come to life, think again. To the IRS, until the divorce is final, you are jointly responsible for community property or income acquired during your entire marriage. If you filed separately during the year in question, to the IRS that means you knew your husband was defrauding the government and didn’t turn him in. NO RELIEF FOR YOU!
- The second condition addresses knowledge and the duty of inquiry. How much knowledge did you have of your ex-husband’s financial situation and how much you should have known, based on your education and experience. If you can’t prove that you’re too uneducated and inexperienced to understand finances, then NO RELIEF FOR YOU! However, if as a prudent taxpayer you can prove that you did everything in your power to get the information from your spouse but failed, then you might have a chance.
Honest Mr. Taxman – I had no idea my husband made so much money! Excuse me while I shuttle off to Bermuda for my spa treatments!
- The third condition is the one that sinks most appeals. For me, it was the easiest to prove but apparently many women drive around in Ferraris, shop on Rodeo Drive and winter in Aspen all the while unaware their husbands have money. Then, after being confronted by the taxman, they try to claim innocent spouse relief. I have to point out that the tax man doesn’t care if at the time of the appeal you’re working a minimum wage job, living in a trailer park and supporting three kids. If, during the year covered by the questionable tax return, you and your spouse lived a very lavish life style NO RELIEF FOR YOU!
*All the images on this post are from Bing.com