In recent headlines, an Ohio woman has brought a refund suit in district court, seeking recovery of taxes and withholding from the IRS that she claims were based on the improper return filed by her abusive ex-boyfriend. The ex-boyfriend fraudulently filed his 2015 tax return listing her as his spouse and her child as a dependent, neither of which were true.
The ex-boyfriend owed taxes for 2015 and the IRS has withheld her refunds from 2017-2023 to offset the ex's 2015 liability. The woman seeks approximately $15,000 in refunds due to the fraud and is being represented by the University of Toledo Low Income Taxpayer Clinic.
It's a sad reality that abusive relationships exist and persist in modern society. One of the most invisible forms is financial abuse. In my years of experience as a family lawyer, especially with regards to divorce, financial abuse could run the gamut from excessively wasteful spending by one party, hiding assets (or massive debts) from the other party, hoarding income and exerting strict financial control by a sole/higher-earning party, and any combination thereof. Manipulation of finances by one party can be so commonplace that the Internal Revenue Code and our federal tax jurisprudence provide statutory and equitable relief for such victims in our Innocent Spouse laws. This is precisely why I personally believe there is such importance in understanding the complex intersections of family law and federal tax law.
Although at first pass, it may not seem like a situation most individuals feel they need to consider, that isn't the case. Again, it is a sad statistic that in America, nearly 42-45% of all first marriages end in divorce. I would wager that most if not all of that 42-45% entered into their marriages expecting they would last. These spouses and ex-spouses file joint returns or separate returns that could be playgrounds for petty misstatements to the IRS and latent fraud. Ex-spouses who continue to share custody of minor children must consider their child dependency exemptions from year to year.
Still, many more taxpayers could find themselves vulnerable to this sort of situation, particularly for long-term domestic partners without the label of "spouses" that may file as head of household together and later separate and need to file individually. Another common offense between partners could involve children of one party who are then improperly claimed as dependents by the nonparent, like in the case described above.
This case also serves as a timely reminder with 2024 drawing nearer to a close of the ability to protect yourself on the front end by making sure you know the risks of mingling assets or accounts with a partner. While you may share responsibility for such assets sometimes there is no oversight of your partner's actions, and having personal tax or other financial advisors weigh in on protective measures when you are contemplating marriage or cohabitation might be a worthwhile endeavor.
As the IRS migrates to more and more automation and more and more electronic procedure, planning and protecting for these fall outs and mismatches, and knowing your remedies if you find yourself on the receiving end of such fraud, is more than just financial advice, it's relationship advice.
The case described is Huffman v. United States, N.D. Ohio, No. 3:24-cv-01904, complaint dated 10/31/24. This story was adapted from Bloomberg Law News via Bloomberg Law Automation.
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