When spouses file joint federal income tax returns, they’re generally both liable for the tax owed. But under certain conditions, a filer may qualify for innocent spouse relief and avoid liability.
In one case, an employee for a tile retailer had unreported income from foreign business dealings. His wife sought innocent spouse relief, stating she didn’t understand financial documents. But the U.S. Tax Court found that that wasn’t an excuse. It also found, among other things, that she’d turned a blind eye to the discrepancy between her husband’s income and their spending (such as paying off their mortgage in five years and buying a new car with cash). The court stated that “she should have known that their joint federal tax returns understated her husband’s income.” Her claim for innocent spouse relief was denied. (TC Memo 2019-143)
If you have any questions, please contact one of our tax professionals at (973) 298-8500.