Tax Court Denies Innocent Spouse Relief: Meaningful Participation Matters!

Spouses filing joint tax returns are generally both liable for the tax owed. But sometimes a spouse may qualify for innocent spouse relief. In one case, a husband owned an insurance firm and his wife ran a small business. She helped their accountant prepare joint tax returns by supplying financial information and signing the returns. After the couple divorced, the IRS found tax deficiencies on their prior returns. The wife sought innocent spouse relief, claiming she lacked knowledge of their finances. The U.S. Tax Court denied her request because records showed she’d “participated meaningfully” in their finances and that some deficiencies arose from her unreported income. (TC Memo 2025-91)