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Don’t File a Complaint With the IRS if Your Fraudulent Refund Claim Is Being Processed Slowly

In TCM 2022-55, Judge Juan Vasquez gave us an opinion that has many characteristics of a great novel. The case involves an innocent spouse.

The part about the innocent husband is kind of interesting, but the narrative about how the defect came to be is even more fascinating.

Everyone’s name is now publicly known, of course, but in situations like this, I try not to make the taxpayers any more well-known.

Therefore, we’ll refer to the pair as Joe and Mary. Dick, a now-adult kid of theirs, as well as Mary’s mother, whom we’ll refer to as Mom, are also mentioned in the narrative.

The Long Story

Jason Freeman describes it as follows in his coverage of the case: “an illustration of how the complete life history of a taxpayer may be taken into consideration when deciding whether to grant innocent spouse relief under section 6015(f) of the Code.

The relevant fact pattern ran from 1972 to 2017 “. Remember that the version of events that we have is the one that Judge Vasquez ultimately decided to accept.

Following Mary’s college graduation with a degree in art instruction, Joe and Mary got married in 1972. Joe served in the Vietnam War.

His general practitioner gave him a PTSD diagnosis in 2011. It is terrible that this was not taken seriously in the 1970s. It is wise to bear that in mind as you read on because Joe serves as the story’s antagonist for the most part.

Joe began a roofing installation business in the 1980s with the assistance of Mary’s brother, who ran a company that produced roofing materials.

Though initially prosperous, Joe’s relationship with his brother-in-law worsened when he fell behind on his expenses.

Mary, finding herself in the centre of the argument, confronted Joe about it. He threw a prized family heirloom vase at her in return. Mary was not hit by the vase, although it was broken.

Mary understood that she could not broach the subject of money with Joe without running the risk of a violent response, but divorce was out of the question because of her religious convictions.

Joe broke up with Mary after she moved to Florida and two more enterprises failed. She did, however, take him back in 1992 when he went to Christian counselling.

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In 1999, Mom moved in with them, making the space feel constrained, so they pooled their money to purchase a bigger house.

The Real Business of the Business of Money Brokering

Joe maintained strict control over his accounts as well as the joint accounts and took precautions to ensure that no one else could access the mail.

Additionally, he kept control of the joint filing. Only by providing Joe with Mary’s W-2 and other tax-related information did Mary contribute to the joint tax filings.

Joe prepared taxes that drastically inflated his withholding to support the family, it turned out.

Eight refund checks from 1997 to 2005 are included in the ruling. They come to more than a million dollars.

However, it is a flaw in the IRS systems that have been used by others. It is truly preposterous that someone could get away with this even once.

The foundation of the OID fraud, which was prominent for a period, was the fact that withholdings are not matched before refunds are delivered.

How the IRS ultimately discovered Joe is what tops the list of absurdity. Using the 2009 tax return, Joe requested a $108,253 refund.

Joe got in touch with a customer service department because the reimbursement did not arrive quickly enough.

They made a connection between him and the Taxpayer Advocate Service, who then launched a case to look into the refund’s status.

That attracted the examination’s notice, which looked at the years 2006, 2007, and 2008. Examinations quickly corrected the excessive withholdings and gave evaluations.
investigation into crimes

Mary discovered the obligations via IRS mail after Joe made a mistake one day in October 2010 regarding mail control.

In response to her questions about why the liabilities were so high, Joe punched her up against the wall. She concealed his revolver that night after he went to bed out of concern that he may discharge it.

They employed Taxpayer Resolution Services to act as their advocate. In response to a levy notice on the 2008 deficit, TRS issued a request for a hearing under the law on collection. IRS Criminal Investigation then became involved.

Agents from CI spoke with Joe and Mary individually, displaying to Mary copies of returns and checks for refunds. She acknowledged signing three of the refund checks but claimed not to have signed the majority of the refunds.

CI made the choice to pursue Joe rather than Mary. Grand juries were convened in the case, but the US Attorney decided not to press charges, telling CI in October 2015.
Accused Spouse

The opinion relates to Mary’s eligibility for joint and several liability reliefs under Section 6015. (f). Seven prerequisites must be fulfilled.

About three of them, Mary and the IRS were in conflict. A fraudulent scheme may have involved the transfer of assets between the spouses.

Mary, did you intentionally take part in the filing of a false return? Was Joe’s possession responsible for the tax debt?

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Mary was deemed credible overall by Judge Vasquez. Mary was unable to conduct a more thorough investigation due to Joe’s intimidating demeanour, even though his claim that sizable refund cheques were connected to his enigmatic money brokering firm is difficult to believe. Dick’s son’s testimony served as proof of this.

Since the imaginary withholdings were not actual, it is difficult to determine who is responsible for them. Since they were Joe’s idea, Judge Vasquez gave Joe ownership of them.

Mary satisfied the criteria for expedited relief after passing the threshold tests. Even though Joe continues to rent a room from her, she and Joe were no longer married.

If found responsible, she would suffer financial hardship. Furthermore, she was unaware of the plan. The abuse in the relationship lends credence to ignorance.

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