Divorce can be a very draining and contentious experience rife with negotiations regarding child support, alimony, and division of assets. Adding to the stress, your soon to be ex-spouse accuses you of tax evasion in open court or on the record. Now, your concerns include incarceration, increased tax liability, criminal penalties, and civil penalties. Your divorce attorney is not equipped to guide you through the process of avoiding criminal tax proceedings. However, the Tax Law Offices of David W. Klasing can guide your through the potential criminal tax liability of your pending divorce.
The nature of divorce proceedings and negotiations surrounding them creates the potential for exposure of under-reporting income, failure to disclose overseas accounts or income, claiming of personal expenses as business deductions, or failure to file.
It is common for a spouse to threaten making allegations of tax impropriety as part of a negotiation strategy. The alleging spouse may be threatening to make such accusations in order to secure more favorable custodial arrangements, or to secure a larger portion of the marital assets, by holding the potential of incarceration or criminal and civil tax penalties over you. This is the more obvious form of danger for potential defendants in criminal tax cases expecting a divorce. The other potential danger lies in the less malicious disclosures. Perhaps your ex-spouse mentions their belief that you have been underreporting your income and your tax filings do not accurately reflect your income when discussing division of assets, or your ex-spouse mentions their belief that you own a Swiss bank account that must be accounted for when dividing the marital assets the marital assets.
Part of the danger lies in the fact that many spouses alleging tax evasion assume that they are protected by the so-called “Innocent Spouse Rule”. Many alleging spouses believe that because their accused spouse took charge of filing taxes for both spouses, that they are immune from prosecution, or because they were not liable for any understatements on the joint tax return. This belief can create a false sense of security that makes an alleging spouse more likely to make accusations throughout the divorce process. However, the alleging spouse should consult their own tax attorney before believing that they are protected by this law. Even if your soon to be ex is not intentional about disclosing your tax related impropriety a judge can use his discretion to report the behavior.
If you are on the cusp of divorce, and are concerned with the potential exposure of under-reporting of income, failure to disclose overseas accounts, false deductions, or failure to file, your have 2 main options: 1) you can gamble and see if the IRS will contact you after learning of your activities, or 2) you can set matters straight before it is referred to the Criminal Investigation Division. Typically, the IRS will consider voluntary disclosure along with other factors when determining whether to recommend criminal prosecution. The Law Offices of David W. Klasing can help you set matters straight before your divorce reveals any potentially incriminating behavior, and help you to gain favor in order to avoid potential prosecution.