Tax Litigation Law Office of Scott Kauffman
(949) 474-1820

Hackney Literary Award
Mighty River Short Story Contest Winner

Surprise tax bill after divorce? Innocent spouse relief may help

Divorce thinking often begins years before service of a divorce petition. Spouses can be known to get creative with schemes to hide income as well as financial mistakes.

How can this affect your tax obligation? When a soon-to-be-ex spouse fails to disclose income or overstates deductions, an audit could lead to a large tax assessment with penalties and interest. Applying for innocent spouse tax relief could relieve you of joint and individual responsibility for the tax bill.

Things that you need to prove

Four general conditions must be met to qualify:

  • You and your spouse (former spouse) filed a joint return with an erroneous item that created an understatement of the taxes due
  • You had no reason to know there was an tax understatement
  • It would be unfair to hold you liable for the underpayment
  • No evidence exists that you and a spouse or former spouse transferred property back and forth to defraud the IRS, a creditor or business partner.

If back taxes come as a surprise in the midst of divorce or after you have finalized the paperwork, you can request this relief by filing Form 8857.

What is an erroneous item?

This could be unreported income. For example, a spouse who frequented Vegas and failed to report significant winnings.

An incorrect deduction or credit is another. This might be improperly labeling personal expenses as business expenses or inflating business costs (i.e., deducting $15,000 for advertising without actually spending that amount).

Knowledge or reason to know

The IRS will want proof that you knew nothing about what a spouse or former spouse was doing. If the actions were obvious, the standard includes an analysis of whether another reasonable person in the same circumstances would have known what was going on. Even failing to ask questions when signing a return can pose a problem.

Because the IRS considers a broad range of facts and circumstances in deciding requests for innocent spouse relief, it is a good idea to seek legal assistance in preparing your request.

No Comments

Leave a comment
Comment Information