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My spouse has cheated on his taxes for years.  How do I avoid being held responsible?

First and foremost, do not file a joint return with him.  That filing status generally establishes full liability for the entire return – even if only one spouse earned the income and generated the deductions.  Your filing status should be “married filing separately,” which creates separate tax status for the year of filing and obligates you to account for your activity, and to pay taxes on only your separate income.  Your overall family tax experience may be less favorable with this status, but if you have concerns about the accuracy and authenticity of his return you should not sign it.

The more significant issue involves previous years and returns already filed, which you presumably did sign when the tax status “married filing jointly” was selected.  Although the general income tax statute of limitations is three years from the due date of the return, or the actual date it was filed, whichever is later, for fraudulent returns or for returns understating income by a certain amount, there is no statute of limitations.  Under these latter circumstances, the IRS is able to institute action on the tax return literally forever.

There is a provision of the Internal Revenue Code establishing “innocent spouse” status.  Although this status has been possible under the Code for many years, taxpayers frequently found they were denied relief because the IRS would argue the claimant had benefited from the tax malfeasance.  A common situation would involve a wife claiming innocent spouse protection when it was disclosed that her husband grossly underreported their income for many years; facts and circumstances of which she would claim to be unaware.  But during the time period subject to the audit, she lived in a home with him, had an automobile, raised children, etc, etc, etc.  The IRS would simply argue that the lifestyle had been financed by unpaid taxes, so innocent spouse status could not attach.  That was the law and probably many spouses deserving of innocent spouse protection were denied it.  However, the statutes and regulations affecting innocent spouse status have been relaxed recently, which have made the application of the innocent spouse doctrine much more “user friendly.” But it is by no means a panacea, or an automatic excuse which any spouse can claim.  The ins and outs of the current application of the innocent spouse provisions are far too involved to review here.  As I often recommend, go to the IRS’ website, www.irs.gov, and get Publication 971, Innocent Spouse Relief. 

Innocent spouse matters often involve some of the most serious issues advanced by the Internal Revenue Service against taxpayers, many involving criminal tax fraud.  Accordingly, I strongly recommend that you consult an experienced tax professional, who I recommend be a lawyer.

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