A New Beginning for Innocent Spouse Relief

The Taxpayer First Act of 2019 made several changes that impact how tax cases are handled. We are just now seeing some of these changes play out administratively and in court. The recent Bacigalupi v. Commissioner, Docket No. 20480-21 (U.S. Tax Court 2022) is an example of this. It is an innocent spouse case that…

Married Filing Separate Spouse Liable for Tax

Marriage, Divorce & Taxes

Marriage presents a number of difficult tax questions. One question is whether both spouses can be held liable when they file separately and one spouse fails to pay their taxes. This is a common marriage tax question that we are asked. One might think that the married filing separate status fully protects the other spouse.…

Divorce Planning for Those With IRS Back Taxes

The IRS often audits tax years where there is some change. This includes mergers, significant asset transfers, deaths or even divorces. The reason why it does this is that these transitions create opportunities for savvy taxpayers or pitfalls for the unwary. These transitions also create motives and introduce new parties to income or assets that…

Is a Divorce a Divorce for Tax Purposes?

Is A Divorce A Divorce For Tax Purposes?

Each state has its own laws. This includes laws that say how one gets married and how one gets divorced. State laws provide a method for accomplishing both acts. The laws of foreign countries usually have similar laws and processes. Religious bodies and affiliations have similar rules and processes. This raises some interesting questions as…

Divorce Payments & Tax Basis in Business

Divorce Payments & Tax Basis In Business

Our Federal income tax laws often build upon the presumption that seemingly adverse parties are actually adverse. Our tax laws do not always account for instances where the parties are actively working in concert to reduce the IRS’s cut. Transfers and payments made in relation to divorce are an example. With our tax laws, it…

Recouping Tax on Marital Wages Repaid to Employer After Divorce

Recouping Tax On Marital Wages Repaid To Employer After Divorce

If a couple files a joint return and pays tax on the income they earn, but after they divorce it turns out that one of the spouses has to repay monies received in error, can the other spouse recoup their portion of the prior tax paid on the income? The claim of right doctrine may…

Tax Court Expands Innocent Spouse Relief for Divorced Taxpayers

Tax Court Expands Innocent Spouse Relief For Divorced Taxpayers

Innocent spouse relief can allow a taxpayer to avoid joint liability for taxes that arose during the marriage. There is an exception for the would-be innocent spouse if they had actual knowledge of the item that resulted in the tax. The U.S. Tax Court addressed this limitation in McDonald v. Commissioner, T.C. Summary Opinion 2016-79,…

Can Lump Sum Cash Payment Qualify as Alimony?

Can Lump Sum Cash Payment Qualify As Alimony?

For taxpayers who pay alimony to an ex-spouse, the tax deduction for the alimony payment is usually quite large.  It can significantly reduce their tax.  But can a lump sum payment made in cash qualify for tax-deductible alimony?   The court addressed this in Muñiz v. Commissioner, No. 15-14478 (11th Cir. 2016). Facts & Procedural History Muñiz…

Delayed Sale to Former Spouse Not Taxable

Asset Sale Did Not Trigger Transferee Liability For Buyers Taxes

Divorce can present tax savings opportunities.  Many of the tax savings strategies involve transferring property and income therefrom to the spouse who is in the low- or no-tax tax bracket.  The recent Belot v. Commissioner, T.C. Memo. 2016-113, case addresses the tax free transfer of property following a divorce. Facts & Procedural History Mr. and Ms.…

Innocent Spouse Relief Granted Despite Knowledge of Error on Return

Truck Driver Not Entitled To Deduct Meal And Supply Expenses

Innocent spouse tax relief can provide a remedy for spouses who are liable for taxes reported on a jointly filed income tax return.  It is an equitable remedy.  But is it available if the tax is due to an obvious error on the tax returns that the spouses both signed?  The court addressed this in Denton…