How does a Southern California Divorce effect one’s tax status? I read a fascinating article on the financial website Smartmoney.com wherein it examines the consequences of an obscure IRS provision known as the “Innocent Spouse Rule,” touching on its particular role in divorce cases.
Briefly stated, the innocent spouse rule allows one spouse to avoid tax penalties related to a joint return if he or she can plausibly claim to have had no knowledge of what the other was doing in filling it out. As the article at Smartmoney.com makes clear, the term “spouse” can be slightly misleading, since the rule can also apply to divorced couples. That, of course, is good news. One of the sad realities of divorce, be it in Orange county, Los Angeles, San Bernardino or elsewhere, is that dissolving a couple’s financial links can sometimes be a more complex process than dissolving the marriage itself.
Smartmoney, for example, cites a case from the 90s in which a woman “was denied an appeal after the IRS wouldn’t let her claim the innocent spouse rule over a return prepared by her ex-husband.” The point here being that tax obligations incurred during the marriage followed the woman even after her divorce. Smartmoney notes that the law was changed in 2004 to make innocent spouse claims easier to file. That, however, has led to a huge spike in the number of claims made under the law and has led the government, in turn, to view such claims with increasing skepticism.