Does Innocent Spouse Relief Always Apply?

Does Innocent Spouse Relief Always Apply?

That is a better question for an accountant, but as a law firm, our answer is “sometimes.”  Innocent Spouse Relief is a claim that one can file if your spouse, or former spouse, failed to report income, reported income improperly or claimed improper tax deductions and credits. This sometimes comes into play during, or after a divorce, because sometimes these things are exposed during the exchange of financial production.

 

According to the IRS website, many married couples choose to file a joint tax return. This is often due to certain benefits the married filing status allows. However, when parties file jointly, both taxpayers are jointly and severally liable (i.e. each party can be solely responsible for the entire liability, not just one-half of it), for the taxes owed. They are both also responsible for any additional tax, interest, or penalties that arise from the joint return, even if the parties divorce after the filings. That is why it is so important to consider tax implications and liabilities when drafting a final divorce agreement, and often, to seek the advice of an accountant.

 

However, in certain circumstances, a spouse can get relief from being jointly and severally liable and one of the ways is to file an innocent spouse claim. This often comes into play when one spouse owns a business and the other spouse is listed as an officer for said business, but doesn’t actually play an active role. In those situations, the non-owner/officer, doesn’t always know about the finances, or how taxes are being filed. Sometimes, the taxes are filed improperly (whether or not the owner-spouse does it intentionally can be irrelevant), and thus, penalties or additional taxes are owed.

 

Wolf & Shore Law Group has represented both business-owners and spouses of business-owners in divorces. We have a thorough procedure to request specific business documentation to bring to light as much of the business finances as possible to best protect our clients. Now that there are loans, grants, and other financial programs available to small businesses due to the COVID-19 health crisis, our divorce clients are more concerned than ever (and rightfully so) when they own a business with their spouse. It is imperative that both spouses understand what is going on with the business’s books to prevent future liability. In some instances, especially with payroll tax deferral, if one spouse defaults on such debts, personal assets may be able to be attached, and that is certainly a situation that everyone wants to avoid.

 

Wolf & Shore Law Group can zealously advocate for you in your divorce involving a small business, and has cultivated a trusted network of colleagues over the years to provide you with the opportunity to consult with financial advisors, accountants, and even have a business valuation done.

 

Our firm is here to make your dissolution easier, not harder. We are here to protect your best interests and help you get through this difficult time! Attorneys Kristen Wolf and Shari Shore are both tenacious enough to argue your case and compassionate enough to understand the difficulties associated with going through this process and juggling your obligations and finances. Wolf & Shore will make your divorce case as stress free as possible, and we have been helping clients just like you since 2009. Ever argue with a woman? You should try it. Contact Wolf & Shore Law Group here, call us at 203.745.3151, or email us at info@wolfandshorelaw.com.

 

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