When taxpayers get divorced, the separation is not always amicable as Jane Lassek (TC Memo 2019-145) can attest. Lassek’s husband reported his 401(k) distribution on their joint federal income tax return as nontaxable. In general, married taxpayers filing a joint federal income tax return are jointly and severally liable for the tax reported or reportable on their tax returns. In other words, the IRS can collect the tax due from either spouse.
Jane Lassek claimed that she was not liable for any portion of the tax seeking relief from joint and several liability under Code Sec. 6015(c), seeking innocent spouse relief. She explained that she was not involved in preparing the return, except for providing her husband with her tax documents. She stated that she never reviewed the filed return because her ex-husband never asked her to do so and she had no knowledge of his omission of income.
Prior to going to trial, the IRS agreed with Lassek. Great news, except that her ex-husband challenged the wife’s entitlement to the relief. He must have believed that “All is fair in love and war.” He contended that the wife knew about his 401(k)-plan distribution and her knowledge disqualified her from innocent spouse relief. He also contended that the wife many have had “reason to know” about the understatement of tax shown on their joint tax return. The court found no support for his argument that the 401(k) distribution was used to pay the mortgage and household expenses nor did the husband discuss with his wife why the distribution was non-taxable and did not give her an opportunity to review the return before its filing.
It was not lost on the court that if the wife was granted innocent spouse relief, that the husband then became 100% liable for the tax deficiency. In cases where the IRS favors granting relief and the non-requesting spouse intervenes to oppose it, the burden of proof shifts from the spouse requesting relief to the IRS. In this case, the IRS agreed with the spouse (Mrs. Lassek) requesting the relief.
For those taxpayers who wish to learn more Innocent Spouse Relief, we suggest you visit our Innocent Spouse Relief web page and read chapter twelve of our book How to Resolve Your IRS Tax Debt Problems.
If you have any questions or wish to schedule a consultation on how to resolve your IRS tax issues at our Exton office, please contact us by clicking here or calling us at (610) 594-2601.
About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent who owns and operates Keystone Financial Solutions, Inc., a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.
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