White-Collar Crime and Taxes
Money is often tight around tax time, and while we all have to pay our fair share, in these times of high inflation this burden is more financially "taxing" than ever. But imagine if you not only had to pay your own fair share of taxes, but also owed taxes on income you had no knowledge of. Something most people don't think about (and why should they) is that cash, and other assets gained through fraud is considered taxable income, even if you didn't know it existed.
Just as the financial fraudster doesn't report ill-gotten gains on their taxes, they also do not report these nefarious gains to their spouse. This means that there are no red flags at tax time, or at any other time for that matter. In fact, perps often present financial gains to their spouses and friends in any number of ways such as an occupational windfall in the form of a raise, new client(s), an inheritance, a loan, stock split, and other plausible explanations. An unsuspecting spouse assumes those funds would be reported in tax filings, but in many households where couples file jointly, one spouse will prepare the tax paperwork, and the non-preparer signs the document, just as they always have. One could argue whether or not the blind signing of such an important document without pouring over it is an oversight. But where is the need for oversight when there is implicit trust? In most cases a spouse isn't even aware that a financial crime has been committed until agents come knocking at the door. One simply assumes that the "filer" reported the joint income properly.
Currently, the only safety net the government provides for the innocent spouse is under the Internal Revenue Code (IRC) §6013(d)(3). If relief is granted there is no further action taken. If relief is not granted, the innocent spouse is subject to joint and several liability for the income tax that went unreported. Gaining full abatement is no easy task because the innocent party must prove they had no knowledge of the illegal funds. But how can one prove no knowledge of something they knew nothing about? Fortunately, during my own experience, because I pushed back, and because there was a paper trial that proved I had no knowledge, I was granted full relief. It was no easy task and it took six months for me to get out from under that nightmare. Sadly, I know of too many wives that have not been afforded relief and are now carrying the heavy financial burden of paying taxes into the hundreds of thousands of dollars. Not because they were guilty of any crime, but because they didn't know they could file for relief, didn't understand the difference between a hardship "deal" and full abatement, or simply because the government agent assigned to their case just negated their standing. This subject is addressed further in one of my previous blogs, and in my book, The White-Collar Wives Survival Guide. (A newly revised PDF edition is available via email at lawlerlisa1@gmail.com).
Here is where the rubber meets the road however, because by creating relief for the innocent spouse with the Internal Revenue Code, the government recognizes that a marital partner who commits fraud exposes their innocent spouse to unjust legal and economic punitive actions that deserve remedy. So why then, does the government routinely negate an innocent spouse's constitutional right to due process and legal standing when it comes to protecting these crime victims against in rem civil seizures and administrative forfeiture? It makes no sense whatsoever to uphold one legal protection for an innocent spouse, and along those same lines, negate another avenue of relief.