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Family Law Newsletter

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    Decisions regarding the division of marital assets upon divorce may be made either by the divorcing spouses themselves or by a judge. State law governs how marital and separate property is divided in the property distribution.... Read more.
  • “Recapture of Alimony” for Federal Income Tax Purposes
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  • Relief from Community Property Tax Laws
    Under the laws of some states (i.e., “community property” states), property acquired and income earned during marriage may be “community” property. This generally means that such income may be considered income... Read more.
  • Effect of Separation and Divorce on Estates and Trusts
    Most people are aware that a surviving spouse is usually entitled to inherit all or a large portion of the estate of a deceased spouse. Fewer understand the effect on estates if one spouse dies during a legal separation or after a... Read more.
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Innocent Spouse Relief For Tax Liability

Many married couples file joint tax returns to take advantage of certain benefits offered by this filing status. This may result in the unfortunate and unintended consequence of one spouse being held responsible for the underreporting of income by the other spouse. Even when there is a divorce decree stating that one spouse will be solely responsible for any amounts due on prior tax returns, the IRS may withhold a tax refund of the other spouse to satisfy the former spouse’s tax obligation.

When a married couple files a joint tax return and penalties arise as a result of an underreporting of taxable income, the IRS will relieve one spouse from liability if that spouse can prove that he or she is “innocent” of any wrongdoing. In order for the an individual to obtain relief as an “innocent spouse,” the following criteria must be met:

  • The return filed must be a joint return, or, if the return was filed while living in a community property state, the return filed may be a “married filing separately” return
  • At the time the return was filed, the individual believed the correct amount of tax was, or would be, paid
  • The individual’s spouse failed to report or underreported his or her income
  • The individual did not have knowledge of the unreported income or erroneous items at the time the return was filed
  • It would be unfair to hold the individual liable for the tax deficiency
  • The individual applies for relief no later than two years after the IRS’s first attempt to collect the deficiency

If an individual meets the criteria for innocent spouse relief, the individual will be relieved of responsibility for the tax due on the return or any penalties or interest. Depending on the facts and circumstances, the innocent spouse may be eligible for relief of all taxes due on the return, including penalties and interest, or only partial relief.

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