• 13
  • January
    2012

Experienced family law attorneys know that divorce and taxes are often intertwined. The IRS has made an important tax code change regarding issues related to marriage and divorce. These changes will affect many spouses.

Presently, when a married couple files a joint tax return, one of the spouses may be liable for fraud or misrepresentation by an untruthful partner. If the innocent spouse can demonstrate that he or she did not know of the misconduct, penalties from the IRS may be avoided. This is referred to as "innocent spouse relief."

This is important because the IRS doesn't want to hold an abused spouse accountable for other acts of selfishness or abuse within an unhealthy marital arrangement, according to an IRS spokesperson in Ohio.

The IRS has provided protections for the innocent spouse for 14 years but the agency has now extended the protections, making it easier for the innocent spouse to apply and get approved.

The most sweeping implementation is the removal of the two-year deadline for seeking relief from the IRS under the innocent spouse doctrine. This is of particular importance because tax fraud discovered during divorce proceedings may be a number of years after the offense.

Importantly, alimony and child support are usually based on tax returns. If the tax returns were fraudulent, family law courts must reassess the financial arrangement. It will be especially important for the innocent spouse to recover these potential losses and avoid liability to the IRS.

Finally, spouses who were denied access to the protections due to the two-year restrictions will be able to reapply under the new IRS rules. These are sweeping changes that will be sure to benefit married and divorced spouses across the U.S.

Sources: ABC Action News, "IRS eases restrictions on 'innocent spouse' tax cases," Tim Grant, Jan. 5, 2012