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Tax audit warning flags, part 1: vindictive former spouse

No one knows exactly what Google's famous algorithm is. Nor does anyone outside the IRS know exactly what triggers a tax audit. But based on experience, it is possible to make certain educated assumptions about what the warning flags for IRS audits are.

One such red flag is going a contentious divorce. If your ex-spouse has it out for you, it is entirely possible that he or she will try to get you in trouble with the IRS.

Embittered former spouses have been known to contact the IRS, accusing their former partners of various high crimes and misdemeanors. These can range from underreported income to money laundering and other potentially serious financial crimes.

To be sure, sometimes the ex-spouses are merely blowing smoke and there is nothing to be feared from an IRS audit or investigation. They write an anonymous letter to the IRS with nothing more than a vague hope of making life difficult for their former intimate partner.

But there are also cases in which there is a method to the ex-spouse's madness. The ex may have his or her eyes on a whistleblower award. Those awards can be from 15 to 30 percent of the taxes collected as a result of the tip.

In short, vindictive ex-spouses are definitely a wild card when dealing with the IRS after during or after your divorce.

This is a different scenario, of course, from the so-called "innocent spouse" rule. Under that rule, a spouse may be relieved of tax liability on a joint return when the other spouse engages in certain forms of misconduct or wrongdoing.

What we're talking about here is quite different. It's not a rule, but a rule-of-thumb: beware the vindictive former spouse!

Source: "12 tax audit red flags - your ex wants revenge," CNN Money, 3-21-13

Our firm handles situations similar to those discussed in this post in California. To learn more our legal practice, please visit our page on IRS audits.

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