Tax Fraud Reporting & Divorce
Dealing With Tax Fraud Accusations From Your Spouse During a Divorce In Arizona
Divorces can be acrimonious. While some couples split amicably, many others spend months, or even years, litigating issues like child custody and support, spousal maintenance, and property division. Some spouses will take opportunities to spite each other, regardless of who gets caught in the crossfire- even themselves. So what happens if you and your spouse have hidden assets, lied about income, or otherwise committed during the marriage, and your spouse threatens to reveal it during the divorce? Read on for our Arizona divorce lawyer’s discussion.
Arizona Is a Community Property State
Before beginning any discussion about divorce, it’s important to understand the laws that apply in your area. Arizona is a community property state, as opposed to equitable division, which is used in some other states.
In community property states, everything accrued during the marriage by either spouse is split evenly if they divorce. This not only means assets, but debts as well. Anything acquired before the spouses marry is that spouse’s separate property. Inheritance and gifts to one spouse during the marriage will also be that spouse’s separate property. Separate property can also become commingled by community property contributions.
Many people assume that the only assets to divide during divorce will be joint bank accounts, vehicles, and houses. There are other assets that can be easy to forget, despite being far more difficult to divide. Investment accounts, especially those started before marriage, can be complicated to split. Pensions and other retirement accounts must be split using a QDRO, or a Qualified Domestic Relations Order.
Common Tax Crimes
There are several different indiscretions you and/or your spouse may have committed during your marriage that constitute tax crimes. You could be charged with tax evasion, conspiracy to commit tax fraud, money laundering, and more.
Some potential situations that could apply include:
Failing To Report Income From One Or More Sources
Lying To An IRS Agent
Using Offshore Accounts To Hide Assets & Income
Filing False Tax Documents
Fraudulent Property Transfers
Accepting Cash Payments To Avoid Reporting To The IRS
Reporting Personal Purchases As Business Expenses
Neglecting To Report “Side Gig” Income
The Risk Of Exposing Tax Fraud
There are several reasons your spouse may want to expose your tax fraud in the moment. Simply causing you strife could be one of your spouse’s motives. Your spouse may believe that proving that you are a liar will make them look more honest in comparison, and benefit them in later divorce proceedings. This can often backfire, depending on the spouse’s level of involvement with the fraudulent activity. Both criminal penalties and financial consequences are on the table.
Some spouses may also believe that their spouse’s tax fraud can penalize them during property division. Your spouse could be even more at risk of mistaken beliefs if they are unrepresented by an attorney. Both spouses could face civil and criminal consequences for tax offenses, regardless of which spouse reports them. While your spouse may have exposed the offenses as leverage for a larger share of community property, this may actually decrease the amount of cash and assets available. After fines, interest, penalties and asset seizures, your spouse may actually be left with less funds and property than if they had never exposed the fraud.
What If I Wasn’t Involved In Tax Fraud?
In some circumstances, your spouse may have taken actions that resulted in your unknowingly committing tax fraud. The burden could be on you to prove this if you filed joint tax returns with your spouse.
One way to deal with your spouse’s tax fraud is by filing for innocent spouse relief. You must meet three requirements to qualify for innocent spouse tax relief. First, you must have filed a joint tax return with erroneous items placed by your spouse. Next, you must attest that you did not and could not have known that your tax return was fraudulent at the time. Lastly, the IRS must agree that when all the facts have been taken into consideration, it would be unfair to hold you liable for the tax debt. You may receive full or partial relief for the associated tax debts.
You may also succeed by filing for relief by separation of liability. You must either be legally separated or divorced from your spouse to qualify for this type of relief. You also can’t have lived with the spouse when the tax form in question was filed. Obviously, this form of relief can only be used in very limited circumstances. You should contact a Mesa criminal defense attorney if you are seeking either form of relief from liability for your spouse’s tax fraud.
Tips For Dealing With Threats To Expose Tax Fraud In a Divorce
While every situation is different, there are some basic steps you should follow if your spouse threatens to reveal tax fraud as part of your divorce.
Some tips apply to almost every situation:
Consider Divorce Mediation
A divorce mediator is trained to facilitate out-of-court negotiations during a divorce. The divorce mediator is a neutral third party, and doesn’t represent either spouse. Your mediator may be able to calm down your spouse enough to not expose any tax-related offenses.
Seek Out All Of Your Options: Innocent Spouse Relief, Equitable Relief & Separation Of Liability
You may have options like equitable relief, separation of liability, and innocent spouse relief available to you. However, some of them have strict requirements. Others will be a factor-weighing situation. A Mesa divorce attorney will guide you through all of the options that are available to you.
Think Twice Before Trying To Beat Your Spouse To Reporting The Tax Fraud
Your gut reaction to such a threat may be to reveal the news yourself. Your spouse may be bluffing, so call your spouse’s bluff by waiting to see if they follow through.
Hire An Experienced Attorney In Arizona
This is not a situation where you should try to pinch pennies with DIY. An attorney will make sure you address your imminent issues promptly and correctly so that your penalties are minimized.
Don’t Let Tax Fraud Impact Your Divorce, Call Our Experienced Attorneys In Mesa Today
If your spouse has threatened to expose fraudulent tax activity as part of your divorce, you need the representation of a high quality, experienced family law attorney. In addition to your family law issues, you may also need an attorney with criminal defense experience. Our full service law firm offers representation in family law, criminal defense, and bankruptcy, so you can explore every possible solution for your situation.
Additionally, our Arizona divorce attorneys offer phone consultations and convenient office hours to fit with your busy schedule. All of these benefits come at affordable rates and payment plan options. This applies to both family law and criminal defense retainers. To get started, call My Arizona Lawyers Law Firm or use our online form to schedule your free consultation today.
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