Legal Question in Tax Law in Illinois

Re: Husband cheated on tax return two years in a row

If the only contact from the IRS is a notice indicting that an �information return,� such as a Form 1099 issued to your husband by one of his customers, did not match what was shown on the return, he would appear to fall within the IRS�s recently revised �voluntary disclosure policy.� This would permit the filing of amended returns without the risk of criminal prosecution, although obviously there would be additional tax plus penalties and interest. You can find more on the voluntary disclosure policy in an article I wrote for publication by the Maryland Society of Accountants, posted in the articles section of my firm's website, www.bjhaynes.com. The article containing this information focused on nonfilers, but the explanation of the voluntary disclosure policy is equally appropriate to a situation in which income was omitted.

You also need to consider how the additional tax will be paid. Since you apparently filed a joint return, you are �jointly and severally� liable for the additional tax. However, if you did not know and had no reason to know of the omitted income, you might qualify as an �innocent spouse,� although doing so while one is still married requires a showing that the collection of the tax would be �inequitable� and would produce a financial hardship. And if you have any reason to think that your husband may continue doing this in the future, you should file separately so that you are not exposed to the additional tax, penalties and interest that will result when he is caught.

Although it sounds like you can deal with the problem at this point, time will not make things better. Indeed, it can only get worse from here. This needs to be dealt with quickly and appropriately, and you need to find counsel in your area familiar with these issues.