Spouses filing joint federal tax returns are generally both liable for the tax owed. But they may be eligible for innocent spouse relief. In one case, a husband was the sole owner of an engineering firm. The IRS audited their joint tax returns after their divorce and found that the couple had tax deficiencies of $443,517 plus penalties, for three tax years. The wife argued many of the business expenses her husband claimed were for a lavish condo he occupied while working away from home, primarily for his personal benefit. The wife handled the firm’s payroll but had no role in reporting her husband’s business expenses. The U.S. Tax Court granted her innocent spouse relief. (TC Memo 2024-76)
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