Some residents of Dallas and all across the country might not have to pay taxes, interest and penalties if the Internal Revenue Service finds the return to be fraudulent. It’s important that people who are conned by others not go through the grueling process of having the IRS audit their finances.
Some people might be eligible for tax relief by using the IRS’ innocent spouse relief rule. Under that regulation, according to IRS policy, the agency might not find a co-signer on a joint tax return liable if the spouse can prove he or she was unaware or didn’t have a reason to challenge the veracity of a tax return.
Others could invoke the equitable relief rule, where the IRS will remove the tax liability from one party under certain circumstances. Those circumstances include when a spouse can prove he or she had fallen victim to domestic violence or other spousal abuse, said an IRS expert. In those cases, the filer might not feel comfortable challenging the tax return submitted by the other party out of fear.
The IRS expert said the agency always finds tax cheaters, and the penalties can be extensive for those who cannot claim to be an innocent spouse. When the IRS audits a tax return and rules the taxpayer knowingly evaded paying taxes, criminal prosecution or a penalty for civil fraud can occur. The latter can bring a penalty of as much as 75 percent of the amount of tax underpaid, as well as interest and other penalties.
From October 2010 to September 2011, the IRS tagged taxpayers with more than 2,800 penalties for civil fraud. Fines totaled almost $200 million. If a taxpayer is found guilty of criminal fraud, the penalty could reach a fine of as much as $250,000 and a prison term of five years.
Source: The Sacramento Bee, “Personal Finance: Tax time also means tax cheating,” Claudia Buck, April 8, 2012