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Spouse May Be Liable For Fraud On Joint Tax Return

(credit: Getty Images)

(credit: Getty Images)

feldman_amy Amy Feldman
Amy E. Feldman is a business commentator and legal business...
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By Amy E. Feldman

PHILADELPHIA (CBS) - Are you the innocent spouse? Maybe on your taxes at least.

It does happen that one spouse doesn’t know the full extent of his or her spouse’s gambling losses. But, for 70-year-old Leonard Harbin, that wasn’t the problem. When he prepared joint tax returns, he was unaware that his wife had actually netted winnings of over $100,000.

Sounds like a good problem – but Uncle Sam disagrees.

If you sign a joint tax form that you didn’t know wasn’t true, can you be held liable for your spouse’s fraud?

Your joint tax return makes you jointly liable with your spouse for tax debt. A defense to that is called the innocent spouse doctrine in which you prove that you did not know – and had no reason to know – that the understated tax existed AND that it would be unfair to hold you liable for the tax.

The IRS will take into account factors like whether you participated in the activity, and whether you asked about the items on the return and received assurances.

So, read the form before you sign it because it’s never a good idea to bet that it’s probably right.

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