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A third form of tax relief for erroneous joint returns: equitable relief

In recent posts, we’ve been looking at potential avenues of relief available to spouses who come under IRS investigation based on a discrepancy in a tax filing. As we’ve noted, innocent spouse relief and separation of liability are exceptions to the general rule that spouses are both fully liable for misstatements on joint tax returns, but these forms of relief are only available when certain conditions are met.

A third avenue of tax relief that may be available to those who don’t qualify for either of the above is equitable relief. Both understatements and underpayments of taxes may be covered by equitable relief, whereas only tax understatements are potentially covered with innocent spouse relief and separation of liability. 

Work with experienced advocate to seek relief from tax joint liabilities incurred by spouse, P.3

In previous posts, we’ve looked briefly at innocent spouse relief, which is available to spouses who did not know and could not have known about understatements in tax reporting reported by their spouse, and it would be unfair to hold them responsible for the understatement. Another form of tax relief that may be available, for spouses who don’t qualify for innocent spouse relief, is separation of liability.

Separation of liability is available to those who have filed a joint return and who are either (a) no longer married to, or are separated from, the joint spouse, or (b) not a member of the same household as the spouse who filed the joint return in the year preceding the date on which the spouse filed a request for innocent spouse relief. 

Is your business misclassifying workers?

You can generally classify people who provide services for your business as independent contractors or employees. How you classify each service provider depends on a number of factors, and there is not a simple checklist to determine whether a person is an employee or contractor.

Typically, the more control your business has over a worker, the more likely it is that the person is an employee.

    Work with experienced advocate to seek relief from tax joint liabilities incurred by spouse, P.2

    Previously, we began looking at the topic of innocent spouse relief, and the conditions under which it is available. As we noted, an important requirement that for innocent spouse relief is that the spouse seeking relief must not have known or had reason to know of the errors. Innocent spouse relief cannot be applied to a spouse’s liabilities arising from such errors.

    One important reason to work with an experienced attorney in seeking innocent spouse relief is to ensure that the IRS has all the facts and circumstances it needs to make an accurate determination about a spouse’s knowledge of tax errors. 

    Work with experienced advocate to seek relief from tax joint liabilities incurred by spouse

    In recent posts, we’ve looked briefly at the difference between tax negligence and tax fraud, noting the differences in terms of intent, evidence and penalties. One issue that can sometimes arise with tax returns is, what if an individual filing a tax return has little or no knowledge about what was reported?

    This can happen, for instance, when one spouse—or former spouse, in cases of divorce—takes responsibility for a joint tax return, whether by filing the return on his or her own or by hiring an accountant or attorney as a paid tax preparer. What responsibility does the other spouse have when he or she essentially didn’t handle any of the tax filing but the IRS later finds discrepancies and seeks penalties for negligence or fraud?  

    3 tax implications to consider when starting a business

    You may have a great idea for a startup and want to begin the process of establishing your business. You find yourself focused on marketing, advertising, financing, hiring or whatever else your company needs. But before you proceed any further, take a step back and consider the tax implications of your small business. If you do not review how the setup of your business will affect the taxes you will owe, you may end up having to pay more than you expected. Start by considering these three factors.

    What is the difference between tax fraud and tax negligence, and why does it matter? P.3

    We’ve been looking in recent posts at the difference between tax fraud and negligence, and emphasizing the importance of taxpayers working with an experienced attorney when the IRS decides to investigate reporting discrepancies.

    It is important for the taxpayer that a tax investigation is as accurate as possible, since the penalties he or she faces, if any, depend on the investigator’s conclusions and subsequent agency actions based on them. Working with an experienced attorney during the audit process can help ensure these matters are effectively addressed and that the taxpayer’s interests and rights are protected throughout the process. This is particularly important if an audit is likely to result in penalties or referral for criminal prosecution. 

    What is the difference between tax fraud and tax negligence, and why does it matter? P.2

    In our previous post, we began looking at the difference between tax fraud and tax negligence. As we noted, the difference is between being mistaken or careless, or perhaps reckless, and intentionally attempting to deceive the IRS in tax reporting.

    The IRS’ Internal Revenue Manual lays out some of the things tax examiners and auditors consider for when distinguishing negligence and fraud in an investigation. While the signs may be very clear one way or the other in some cases, distinguishing whether discrepancies are due to negligence or fraud is not always an easy matter for IRS agents. 

    What is the difference between tax fraud and tax negligence, and why does it matter?

    For readers who do their own taxes, chances are most have made a mistake at some point that required correction. For some, the correction may have been made automatically by the IRS, while others may have gotten a call to clear things up.

    Those who have made significant mistakes may have been subjected to a full audit in which the IRS scrutinized all the taxpayer’s accounts and financial information to ensure everything was reported correctly. Anybody who has been through an IRS audit knows it can be nerve-wracking. 

    Work with experienced legal counsel during IRS investigation

    Last week, the Internal Revenue Service released its annual Criminal Investigation report for 2016, detailing the number and type of investigations, recommended prosecutions and federal sentences obtained against those accused of tax crimes. While the total number may seem large to those unfamiliar with the annual report, they actually show that there was a general decrease in cases.

    Much of the reason for the decrease in criminal tax cases is that the IRS has been experiencing budget cuts for the last six years. The IRS has dealt with this by cutting staff, including special agents, reallocating its resources and focusing on high priority cases. 

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