Do you suspect your spouse has committed tax fraud? Whether they're hiding income, understanding their earnings, or overstating expenses, they've now put you in a difficult position. Should you report their activity to the IRS? The answer is complicated. To help you find the best way forward, here are five things to know first.
1. Learn Whether You're Right
Before you take any steps, start by making sure you're right about the fraud. Errors, especially when they grow over several returns, can look like fraud when they aren't. You also may not know enough about your spouse's business activities or tax law at the time of the returns to determine if something is intentional. A tax professional will look at the returns in question and help you find the truth.
2. Learn Whether You're Liable
The next big question to address is whether you're liable for their unpaid tax issues. If you shared one or more income tax returns, the IRS generally holds both parties equally responsible for everything in the return. And how fraudulent funds are used can also embroil a spouse into an unpaid tax mess. Know what you're getting yourself into.
3. Learn Whether You Qualify for Relief
The IRS does understand that sometimes spouses are not aware of their partner's fraud. There are programs that innocent spouses can use to separate their own tax liability from a fraudulent or delinquent spouse's. These include innocent spouse relief and injured spouse relief. But qualifying for this relief can be complicated. Be certain you can qualify if you need to avail yourself of it.
4. Learn Whether You Can Get Rewarded
Did you know that you may be able to get a whistleblower reward? If the IRS is able to collect additional taxes due directly to a particular whistleblower's report, that person may get between 15% and 30% of a large collection. However, don't count on the whistleblower rewards because these aren't as common as many taxpayers think.
5. Learn Whether It Means More Trouble
Depending on your situation, your spouse's tax issues can have a longer link to you than just a joint tax return. For instance, if your spouse committed fraud on an individual return, the IRS may have cause to audit other returns too. If you filed jointly in a different, audited year, you may be dragged into the problem. Planning a divorce? You may need to think about things like future income calculations and support.
Where Should You Start?
The best way to make the right decisions about your spouse's tax fraud is to meet with a qualified tax attorney now. They will work with you to learn these key elements and use that knowledge to protect yourself and find justice. Make an appointment today to get started.
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9 December 2022
Too many single people assume they don't need to plan their estate. My brother fell into this category, and his unexpected passing left our entire family struggling to deal with his home, belongings, and financial accounts. It took nearly three years for the courts to set up a deal because he left no paperwork detailing how he wanted his estate divided. The situation immediately convinced me to work on my own estate, even though I'm still in my early 30's and don't have children or a spouse to worry about. Since it's a little harder to pick beneficiaries and estate managers when you're single, I collected the resources I used for making my own decisions and decided to publish them here on my blog. Use these resources before talking to an estate planning attorney so you're prepared for making hard decisions.