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Ask Law Educator, Esq. Your Own Question
Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Family Law
Satisfied Customers: 116252
Experience:  Experienced attorney: Family law, Estate Law, SS Law etc.
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I recently (as of Friday) found out that my husband was diverting

Customer Question

I recently (as of Friday) found out that my husband was diverting funds to a separate account for the past year and a half. He used this money for illegal gambling that I was unaware of. He neglected to pay the IRS the tax payment that was due at the end of January. I did not know he was gambling and am in shock at the amount that he has diverted and lost. I am a stay at home mom, and am unsure what to do next. What are my obligations legally to his debt, do I have any options to protect myself financially?
Submitted: 6 years ago.
Category: Family Law
Expert:  Law Educator, Esq. replied 6 years ago.
At this point you need to get a tax attorney and you will have to file an innocent spouse form with the IRS (Form 8857) disclaiming and proving no knowledge regarding the tax matters. You are eligible for relief if you filed a joint return on which there was an understatement of tax due to an erroneous item relating to your spouse; if you didn't know, and had no reason to know, about the understatement when you signed the return; if looking at all the facts and circumstances, it would be unfair to make you pay the tax, and; if you apply for relief under this provision within two years after the IRS begins trying to collect the tax from you.

If you meet all these requirements, then you don't have to pay the portion of tax that relates to this erroneous item.

This is available while still married. Innocent spouse relief may be available even if you're still married to, and living with, the spouse who should have reported additional tax. If you have assets of your own and want to protect them from collection by the IRS, these rules determine whether you can be held liable.

Lack of knowledge is the biggest factor here. If you only knew (or had reason to know) about part of the understatement of tax, you're only stuck for that part. If you had reason to believe your spouse was cheating to the extent of a few hundred dollars and it turned out to be many thousands, you should only have to pay the smaller amount. Thus, now you have knowledge you must report this to the IRS. However, since this just occurred you may indeed remain held liable still.

You need to sit with a local tax attorney immediately to discuss your options, such as filing separate tax returns immediately.

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Law Educator, Esq. and 2 other Family Law Specialists are ready to help you
Customer: replied 6 years ago.
I did indeed know about the amount owed to the IRS, however I believed that this amount was going to be paid in January. My husband relayed to me that he was "short" the portion that we owed and was going to file an extension. What came to my attention this week was the fact that he was gambling and spent this amount and far over this amount. He his this money in an an account I was unaware of and had no knowledge of. We did in fact file jointly (however I am a stay at home mom). I did sign the tax return. He has contacted a tax attorney and I specifically asked the question regarding innocent spouse relief. My husband has stated that the attorney said that this would not work in our case. I am just trying to verify that this information is correct, clearly taking his statements at face value isn't wise.
Expert:  Law Educator, Esq. replied 6 years ago.
At this point then you are going to have some problems because you will be jointly liable with him for this money, regardless of why he did not pay and you are going to have to work with the tax attorney to negotiate a payment plan. But, based on my response above and the new information you provided in reply, it sounds like the tax attorney is advising you correctly and you need to personally talk to the tax attorney as well and not take what your husband tells you at face value for right now regarding this matter.
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Customer: replied 6 years ago.
One last question. For the 2010 tax year, can I not sign these returns since I had no idea he was taking distributions? Would I not be liable for that year? How can I be liable if he is the one not paying taxes and spending huge amounts of money on gambling that I wasn't even aware of? I think I may be sick.
Expert:  Law Educator, Esq. replied 6 years ago.
You should not sign those declarations if you do not know them to be correct because if you sign them you would be liable and then would have to prove no knowledge, but you do have knowledge as you said above. You are liable because the taxes are a joint filing and as a married couple you file taxes jointly. This is why you need to personally talk to the tax attorney.

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