The Taxman Cometh: When Ex-Spouses Lie about Their Income

July 9, 2013, by Law Offices of James V. Sansone
By Law Offices of James V. Sansone on July 9, 2013 8:00 AM |

tax man.jpgDo you fudge the numbers when you file your IRS tax returns? If your answer is yes, you're not alone. The IRS estimates that unreported income costs the U.S. Treasury $250 billion or more a year in unreported taxes.

Guess who is likely to lie? Yes, the maligned CEOs in this country. However, other people tend to lie on their taxes too, including business owners, who can inflate expenses; people with rental properties, who can inflate repair costs; and people with investments.

Everyone else who files taxes and works for an employer must submit an employer-verified W-4, which notes your income and taxes paid. Employees have little occasion to lie to Uncle Sam.

Beware of the Angry "Ex"

If you think the IRS discovers tax evasion through their network of detectives, you are somewhat correct. However, the IRS often discovers unreported income or inflated expenses from estranged ex-wives still looking for revenge, or angry ex-husbands who might be unhappy with the fact that the ex-wife's lover is living with the couple's children.
As Shakespeare said, "Hell hath no fury like a woman scorned." Or in some cases, like a very angry ex-husband.

Community Property in California

In California, community property laws allow for both spouses to split all assets accumulated during the marriage, including homes, businesses, vehicles, investment properties and other items.

Talk to an Attorney before Your Report Your Spouse

If a husband lied on his taxes during the marriage, he may continue to lie in order to reduce his liability for spousal and child support. If the wife knew about the false income tax returns, she could report her former husband to the IRS and depending on the outcome, receive a higher support payment.

Alternatively, suppose an ex-husband, who is receiving spousal support, suddenly has his payments reduced due to a reported drop in revenue in his ex-wife's business. He could report his suspicions to the IRS, and if they are confirmed, the ex-wife could find herself in the kind of trouble she never dreamed possible.

However, if you knew your spouse was under-reporting income while you were married, you might not want to call the IRS because you, too, could find yourself facing penalties. There are some cases in which you might be to claim you were an "innocent spouse" in the fraudulent filings and avoid tax evasion charges.

But the best first step you can take is to speak to an experienced family law attorney before reporting your ex-spouse to the IRS to determine what your liability might be.

Do you have questions about custody, guardianships, children's issues, or spousal support? If so, call me or schedule a consultation with the Law Offices of James V. Sansone at 707-623-1875 or contact me by email. You can find additional information on family law, children's issues, spousal support, domestic violence as well as a list of resources you'll find helpful on our website.