Wednesday, February 15, 2012

G&G Tax Tip: "Innocent spouse" can avoid taxes

This is
G&G Associates Tax & Financial Consulting
e-Newsletter
Tax Tip of the Week

How an "innocent spouse" can avoid taxes

Imhotep (Wisdom to You) G&G Readers,

When a husband or wife cheats on taxes, guess who is liable for the unpaid taxes and penalties? The answer is that BOTH spouses are legally responsible.

However, there is a ray of hope for the innocent party. Thanks to new guidance given by the IRS, it's now easier for the non-cheating spouse to avoid financial responsibility.

I hope your spouse is honest, but if there "EVER" is any tax hanky-panky going on, you'll find my new article a "must read." Get all the facts when you read the article titled G&G Tax tips: How an "innocent spouse" can avoid taxes.

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We can service clients anywhere in the world and we look forward to assisting you in getting your tax return prepared for the 2011 and beyond tax season. (Referrals available upon request)

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For more information about G&G Associates, visit our website at www.gngnassociates.net, and click on the "TAXES" tab.

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New IRS Rule Makes More Spouses Eligible
for Innocent Spouse Tax Relief

What is innocent spouse tax relief, and how do you get it?

If your spouse made mistakes or flat-out lied on a joint income tax return and you signed it, the IRS holds both of you jointly responsible for any unpaid taxes. Simply saying you didn't understand or you didn't ask when you signed the return is not going to cut it.

But the IRS is not entirely heartless. It understands that there are often genuine situations in which one spouse should not be held responsible for unpaid taxes and penalties caused solely by the mistakes, fraud, or abuse of the other spouse.


New Mercy from the IRS

The IRS has just made it easier to obtain innocent spouse relief with its release of Notice 2012-8.

Say you filed a joint return with your culprit spouse who cheated on the taxes without your knowledge. In this situation, you can qualify for innocent spouse relief. This means the culprit spouse has to pay, not you.

Tax law contains several paths to being identified as an innocent spouse. In the new rules just issued, the IRS made it easier to qualify for "equitable relief" as an innocent spouse. Here's more good news: The innocent spouse can qualify for equitable relief in all 50 states.

As you know, community property states often have different rules, but equitable relief on a joint income tax return applies in a community property state the same as it applies in a non–community property state.


Factors in Your Favor

You bear the burden of proof when asking for innocent spouse relief. In general, the IRS looks at factors that favor and disfavor relief and then makes its decision to grant relief or not. You need more or bigger factors in your favor to win relief.

Factors that weigh in favor of relief include the following:

 You are divorced, legally separated, or no longer part of the same household for the past 12 months.
 You would suffer economic hardship if you have to pay. (To qualify for economic hardship, your income should be below 250 percent of the federal poverty guidelines or your monthly income should exceed your expenses by $300 or less.)
 Your spouse physically or mentally abuses you.
 You did not know or had no reason to know of the errors or fraud committed by your spouse.
 You did not know or had no reason to know that your spouse would not or could not pay the taxes within a reasonable amount of time.
 You had restricted access to financial records or limited financial control over household finances.
 You have limited or no education.
 You complied with tax laws after you discovered the erroneous tax return with your spouse.
 You remain married, but now you file a separate income tax return because you discovered your spouse's errors.
 You are in poor mental or physical health.


Factors against You

Factors that weigh against getting relief include those listed below:

 You signed the joint tax return even though you knew your spouse had prior bankruptcies, financial problems, or pre-existing issues with the IRS, or could not pay bills on time.
 You are involved in household finances, participate in your spouse's business, or enjoy a lavish lifestyle.
 You have access to the joint bank accounts.
 You have many credit accounts in your name or with your spouse.
 You are highly educated, own your own business, or are in a career that would give you knowledge regarding financial matters.
 You discovered the errors of your spouse's ways, but you failed to comply with tax laws in the years following your discovery.

The good news is that even if negative factors outnumber the positive, the IRS can grant equitable relief.

Visit our website for more information and free online webinar classes to help you make sure you are audit proofing your records, or contact us today to set your appointment if you need a "TAX" OR "FINANCIAL" one-on-one consultation.

One of the benefits of being a client with G&G Associates is that you'll get a free 30 min pre-tax preparation session to make sure you are gathering your documents appropriately before you submit your documents for tax preparation.

Also, all new clients get a 50% discount off the 1 – year annual subscription to G&G Investment Society (GGIS) paid newsletter service a ($74.50) value.

Also, all new clients will get a "FREE" 1 hour Financial Success Strategy Consultation appointment a ($200) value.

Contact us today to schedule an appointment!!!

Until the next time!

Ankh Uja Snb (Life, Strength, & Health),

Asar Maa Ra Gray
Tax & Financial Consultant, RFC
G&G Associates
757-251-3757 office
866-361-3872 toll free fax
www.gngassociates.net

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