It’s tax season. Time to gather your financial documents, visit the accountant, sign on the dotted line, and submit your income tax return to the Internal Revenue Service. For many, the process can be frustrating, as the tax code seems to get increasingly complex each year.
A pending divorce can complicate matters even more.
If you’re in the process of divorcing –or even thinking that you might be soon –you need to answer this critical question: Is it in your best financial interest to file a joint tax return with your husband?
Consider the pros and cons carefully, because filing jointly can have a dramatic impact on your future finances. Be aware that:
Is there anything you can do to protect yourself against being pursued for tax debt that isn’t fairly yours? Fortunately, there is:
The IRS recognizes that there are innocent spouses who sign joint income tax returns unaware that anything was amiss, and further recognizes that these innocent spouses need to be protected. However, obtaining innocent spouse status isn’t necessarily “easy,” and it doesn’t happen in an instant. You will have to prove that at the time you signed the joint tax return, you didn’t know, and further, that you had no reason to know, that there was an understatement of tax. That can be difficult to establish in all but the most black-and-white circumstances. Indeed, you might need a forensic accountant to help make your case.
To decide whether you qualify for relief, the IRS will consider your financial situation, your education and business experience, and even whether or not you asked any questions about items on the return when you signed it. They may determine that you qualify for partial relief, i.e. that you might have known about some of the understated income, but had no reason to know about another portion.
Reminder: When it comes to taxes, my advice is the same as it is with all things financial: Be proactive. The more you know about your family finances, including your husband’s business , the less likely you are to sign a joint tax return you can’t stand behind.
Hot tip: For more information, as well as forms and requirements for applications for Innocent Spouse Relief, visit the IRS’s web page on Tax Information for Innocent Spouses .
Legal matters: Tax evasion and fraud can result in both civil and criminal prosecution. The penalties range from fines to imprisonment, and they’re outlined here .