Getting a divorce is already traumatic. Add an IRS tax audit and possible criminal charges and things can really get ugly.
Unless a divorce is truly uncontested, at least one of the parties is likely to want detailed financial discovery. If you are supporting a million dollar lifestyle on a $10,000 salary, expect many questions.
If both partners participated in the tax avoidance activities, there is a good chance that no one gets caught. Sometimes emotions run so high, however, that one of the parties simply doesn’t care. In that situation, usually the one who runs to the IRS first gets the best deal and avoids criminal prosecution and jail.
Sometimes the primary breadwinner cheats both the government and his or her spouse. Those situations are especially dangerous. Inevitably, the “cheated” spouse seeks a forensic accounting. When that happens, there is a good chance that the questionable deductions or unreported income will be discovered.
If the case ultimately settles, the innocent spouse still has the right to report the activity to the IRS. No release can effectively stop someone from reporting a crime.
If the matter goes to trial and the judge discovers the fraud, the court almost always makes a referral to the IRS or if a state tax, to the local district attorney.
Obviously the best advice is to always properly report and pay taxes. If you find yourself in a divorce and have unreported income or questionable returns, settle with your spouse quickly.
If it is too late and you are already in the middle of a nasty divorce, make sure your divorce lawyer consults with a good tax lawyer well versed in tax audit defense and criminal tax investigations.
Generally the IRS operates on a first contact policy. That means if you go to the IRS first, you might not be able to stop a tax audit or penalty assessment but probably can avoid criminal prosecution. It’s more difficult to avoid problems if your spouse or the judge contact the IRS first.
Think you unreported income, unfiled returns or overinflated expenses? Give us a call today. It’s never too late to come into compliance.
For more information, contact attorney Beth Canfield at or by telephone at (414) 223-0464. Our IRS services are available worldwide and all consultations are protected by the attorney – client privilege and kept strictly confidential.
MahanyLaw – America’s Tax Lawyers