Perhaps you’ve already heard of innocent spouse relief and have done research on the different relief options (innocent spouse relief, relief by separation of liability or equitable relief). Maybe you’ve even pursued one or more of these options already and were denied, simply because the circumstances surrounding your situation just didn’t quite fit the qualifications. There may still be options available depending on the nature of your case.
The relief option that will be discussed in this article is actually a defense for the underlying tax assessment, which if properly defensed would grant relief from the tax debt.
This defense is signature under duress.
WHAT IS SIGNATURE UNDER DURESS?
Signature under duress, according to Internal Revenue Manual (“IRM”) 184.108.40.206.3, is when a taxpayer is unable to resist demands to sign a return and the taxpayer would not have signed the return except for the constraint applied by the other party.
- Furthermore, a signature made involuntarily or under duress is not a valid signature.
What this means is that a signature made under duress on a jointly filed return that causes the equal assessment of tax debt to you and your spouse makes that jointly filed return invalid.
If the tax debt was solely caused by your spouse’s income, you would no longer be held liable for paying the tax debt. The IRS would adjust their records to show a married filing separate status for both you and your spouse and if you have a filing requirement, the IRS would request that you do in fact file a married filing separate return.
- If during the course of pursing the issue of signature under duress you find that by doing so it may cause you to owe more tax, you can choose to not pursue the issue of duress.
THE IMPORTANCE OF UNDERSTANDING TACIT CONSENT
Tacit consent or implied consent under IRM 220.127.116.11.3.1 means that even though no specific authorization was given the taxpayer knew their spouse was going to sign the return for them or the taxpayer supplied information needed to complete the return and was under the impression that it would be used to file the return.
In the case of proving signature under duress, it would need to be shown there was no tacit consent and that any action you may have taken that furthered the ability of your spouse filing the return was done so under duress or by force.
QUALIFICATIONS FOR SIGNATURE UNDER DURESS
Because this issue is a defense against a tax assessment, there are no set qualifications for proving a tax return was signed under duress. It becomes more about proving the situation and circumstances surrounding the filing of the return caused duress or were forceful in nature.
In addition to this, these situations are generally determined on a wholly subjective standard, meaning whoever can provide the most credible evidence has a better chance at winning the case. This is where having professional representation becomes extremely important.
COURT CASE WHERE PRECEDENCE WAS SET
Stanley v. Commissioner 81 T.C. 634 shows us that not only was there threat of physical harm but that the children were used as leverage against the wife.
- The husband was self-employed and the wife was a W-2 employee.
- The tax liability was assessed due to the husband increasing gross receipts, adjusting cost of goods sold and depreciation from the business he owned.
- The wife, with the children, had left the husband several times previously and the husband had brought the wife and children back to their home each time, at least one time at gunpoint.
- The wife actually lived in a separate part of the house with it’s own entrance, keeping the door to the rest of the house locked.
- The wife voiced that she wanted to file separate returns and the husband told her if she wanted to stay with her children she would have to surrender her W-2 forms to him.
- On one occasion the husband forced his wife into their car, drove at a speed in excess of 100 mph and threatened to push his wife out of the car with his feet.
- The wife surrendered her W-2 forms to her husband because she felt it was the only way she could stay with her children.
- The husband used his wife’s W-2 to file a married joint return and signed both his and her name. The wife never saw the returns until the liability was assessed years later.
Ultimately, it was decided that the wife handed over the W-2 forms under duress and the married filing joint return that was filed was invalid. She was found to not be liable for the tax debt that was assessed because her income came solely from a W-2 where she had the proper taxes withheld.
There are few cases where signature under duress has been litigated, which makes it challenging. However, it can be said that signature under duress when it has gone through litigation hinged on the presence of physical violence, mental abuse, or the threat of either of the two by a spouse.