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The role of knowledge in a request for innocent spouse relief

On Behalf of | Aug 27, 2020 | Tax Law |

Each year households throughout Maryland prepare and file tax returns. While some individuals choose to file separate and apart from their spouses, others elect to file jointly. The responsibility of filing annual tax returns can often fall to one spouse when the partners to a marriage choose to file jointly.

Spouses who file with their partners are generally liable for the tax obligations that their returns require. However, in some cases individuals may discover that their tax return-preparing spouses failed to fully disclose their true financial situations. When this happens, a person may become liable for errors on a tax return that they had no knowledge of existing.

This post will briefly discuss the innocent spouse relief options for men and women who find themselves in this unfortunate situation. It does not provide any legal or financial advice. All inquiries regarding this complex topic should be referred to knowledgeable tax attorneys.

Innocent spouse relief from erroneous tax returns

Generally, only income earned by the innocent spouse’s partner can be claimed as wrongfully reported or fully omitted from a joint tax return. That is because if an innocent spouse earned the wrongful inclusion as wages or other income, then they would have knowledge of its existence and rightful value. An individual who has knowledge of a wrongful inclusion or omission from a tax return cannot later claim innocence when the tax liability is discovered.

Knowledge and reasons to know of errors on tax returns

As mentioned, knowledge plays a key role in whether a person can claim innocent spouse relief from the IRS. Actual knowledge precludes this protection, but the existence of evidence that suggests a person had reason to know about a mistake may also prevent them from seeking innocent spouse relief. The IRS can investigate what knowledge the allegedly innocent spouse had of the financial affairs of their partner, their educational background, and other evidence before determining if they should have had reason to know about the errors.

Mistakes and issues on joint tax returns can affect individuals, their spouses, and even their exes when they reveal themselves. The assistance of legal professionals committed to tax law guidance and representation is imperative for resolving matters with the IRS.