Question

since a spouse's lack of actual knowledge of a understatement is hard to determine the fouce is usually on whether the spouse hard reason to know of the understatement. The examiner will consider which of the following? a. the requestion spose's educational background b. the length of time the taxpayers have been married c. whether the taxpayers have children d. the ages of the requestion spouse and nonrequesting spouse

Answer 1

Ans a. the requestion spose's educational background

The actual knowledge or reason to know test is governed by the principal that the IRS will not deem you an innocent spouse if you were aware of the tax deficiency at the time the return was filed. That knowledge, in the government’s eyes would make you an accomplice to the understatement of tax. Because proving an individual’s actual knowledge can be difficult, the government eased its burden and only has to prove that a person should have had “reason to know” of the deficiency. Reason to know is often referred to as willful blindness in other areas of the law and the IRS will consider all the facts and circumstances surrounding a liability when determining whether innocent spouse relief should be granted. Among the things that the IRS will consider:

• The nature of the erroneous item and the amount of the erroneous item relative to other items
• The financial situation of you and your spouse (or former spouse)
• Your educational background and business experience
• The extent of your participation in the activity that resulted in the erroneous item
• Whether you failed to ask, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question.
• Whether the erroneous item represented a departure from a recurring pattern reflected in prior years’ returns (for example, omitted income from an investment regularly reported on prior years’ returns)