FAQs About Tax Fraud And Filing For Divorce

In divorce negotiations, one of the topics that can be often overlooked is taxes. Unfortunately, failure to discuss how the taxes will be handled with your soon-to-be ex could result in problems for you down the road. More importantly, you could be held responsible for any tax fraud that is committed by your spouse. To protect yourself, here is what you need to know.  

How Could Filing Your Return Lead to Problems?

There are any number of tax filing scenarios that could lead to problems for you. For instance, if your spouse is hiding income from the Internal Revenue Service (IRS) and you file a joint return together, the agency could come after you for the owed taxes if it is discovered. You could even face tax fraud charges, which could have an impact on your future.  

Depending on the level of animosity in your relationship, your spouse could even use filing taxes against you. He or she could file a false return for both of you, which could spark an audit or fraud accusations.  

What Can You Do?

If you and your spouse have yet to file your tax return, there are a couple of things you can do to protect yourself from questions regarding your joint tax return.  

One of those is to have your financial records reviewed by an experienced tax expert who can identify anything in the records that would point towards your spouse hiding income. If income is discovered, you can ask the court to require your spouse to turn over the financial information for the income source to you.  

Your attorney can also include language in the divorce settlement detailing exactly what income you were aware of at the time of the filing. If there is a question of whether or not you were complicit in committing tax fraud with your spouse, you can provide the settlement documentation to the IRS. 

What If You Have Already Filed?

In the event that the fraud is uncovered later and the IRS is attempting to hold you responsible, you have the option of requesting innocent spouse relief. If you are able to convince the agency that you were not aware of your spouse's attempt to commit tax fraud, you could be excused from the debts and other consequences.  

If you are found to be responsible for a portion of the debts owed, the IRS will calculate your share independently of your spouse. There are special rules that apply to requesting innocent spouse relief. Work with your divorce attorney and tax preparer to determine whether or not you qualify.