Can Innocent Spouse Relief Help in Cases Involving Financial Abuse?

Filing taxes can be complicated in the best of situations, but when there are complex factors involved, like financial control by one spouse, the outcome is not always equitable. The Internal Revenue Code Section 6015 provides a remedy for some spouses facing tax deficiencies, but there are strict qualifications for entitlement under this section.

In the case of Kraszewska et al. v. Commissioner, Kraszewska was eligible for innocent spouse relief because her ex-husband, Ricks, controlled their finances during the marriage and refused to share information about his income or allow her to be involved in tax preparation.

Kraszewska et al. v. Commissioner

The Commissioner of Internal Revenue notified Kraszewska and Ricks of a deficiency in their 2017 filing that totaled $6,931, along with a penalty of $1,377.40. Kraszewska sought a review of the deficiency notice and claimed she was entitled to innocent spouse relief under Internal Revenue Code Section 6015.

Background of the Case

Kraszewska, the petitioner, was living and working in the United States on an L-1 visa and met Ricks, the intervenor, in 2014. She was not a US citizen, and when her work assignment ended, she left the US but maintained a long-distance relationship with Intervenor. Petitioner returned to the US multiple times to visit Intervenor, and they were married in September 2016, at which point she moved to the US to live with him.

Despite having worked consistently and earning a comfortable living prior to her marriage, Petitioner became unemployed upon moving to the US. She was financially dependent on Intervenor during her unemployment. They maintained separate and joint bank accounts, and Intervenor was not open with Petitioner about his finances. He refused to share details about household finances, and he controlled all financial aspects of their marriage. They separated in March 2019 and subsequently divorced.

When they filed their joint tax return for 2017, Petitioner was earning money that she reported, but her knowledge of Intervenor’s finances was limited. Intervenor filed their taxes that year and refused to let Petitioner be involved in the process.

Applying for Innocent Spouse Relief Under Section 6015(b)

Petitioner’s application for innocent spouse relief indicated that she did not review the tax return prior to filing because she was prevented from doing so by Intervenor. She claimed she did not know the contents of the return and could not have been aware of any errors. Petitioner also stated that she was afraid to disagree with Intervenor. Intervenor filed a Notice of Intervention claiming that Petitioner helped prepare the 2017 tax return, was involved in every step of the filing process, and received part of the refund. The IRS granted Petitioner’s relief under Section 6015(b).

Petition to the US Tax Court

Despite the IRS ruling granting relief to Petitioner, a notice of deficiency was issued to both Intervenor and Petitioner without incorporating the relief. She then filed a petition with the US Tax Court, and the Court considered the qualifications under Section 6015(b)(1) stating a taxpayer must establish:

• A joint return was filed
• An error caused an understatement of tax
• One individual filing the joint return did not know of the understatement
• It is inequitable to hold that individual liable for the deficiency
• The benefits of Section 6015(b)(1) were elected within two years of collection activities

Based on these qualifications and the statements and evidence presented by Petitioner, the Court determined that Petitioner met all of the requirements for relief under Section 6015.

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