Surprised by an IRS Audit or IRS Bill in Arizona? You may be an "Innocent Spouse".
Many spouses in Arizona are caught off guard each year, by an unexpected IRS audit letter or IRS bill.
The audit and the bill are often the result of the other spouse's failure to disclose some income OR the his or her "overstatement" of a deduction or two on the tax return.
The unsuspecting spouse, has signed the joint return, but truly believes that all the tax due has been correctly calculated and paid, and that the return contained the entire truth about income and deductions.
Surprising to some, the spouse who is "out of the loop" may meet the legal criteria to qualify as an "innocent" spouse as defined by the tax code.
This means that as to that spouse the tax will not be considered due and owing. He or she won't have to pay it.
In order to be "forgiven" the liability for the resulting tax the proposed innocent spouse MUST be able to show 4 things:
1. Incorrect Items
The other spouse disclosed incorrect or erroneous items in the tax return that caused the understatement of the tax owed on the return and thus the unexpected post audit additional tax.
Erroneous or incorrect items are either unreported income or an overstated and incorrect deduction. This includes outright lies about costs or purchases, and items that were paid for or purchased but aren't legally deductible,
2. Unaware or No Reason to Know
The "innocent" spouse was unaware (or had no reason to know) of the errors i.e. this understatement when the return was signed.
One knows or had reason to know of an understatement, if there was of course actual knowledge of the understatement, or a reasonable person in similar circumstances would have known of the understatement.
3. It is unfair
It would be unfair to hold the "innocent" spouse liable, when all of the facts and circumstances are taken into account. Some of the things the IRS considers in determining this "unfairness" standard include whether there has been a divorce/separation, whether the "innocent" spouse received a benefit, whether the "guilty" spouse deserted the "innocent" spouse, whether the "innocent" spouse received a "significant" benefit i.e. more than normal, or out of the ordinary.
4. Request the relief timely
The "innocent" spouse has sought the designation as such via IRS Code Section 6015(b) within two years from the date the IRS collection activity began.
If you have been surprised by an IRS bill or audit and think that it may have been the result of your spouse's or ex spouse's dishonesty, you will want to look into whether you qualify for innocent spouse relief. If you have tried and failed, you may have appeal rights.
Call Arizona Tax Lawyer Michael S. Anderson for free to discuss the situation at 480 507 5985.
