In part, below is an excerpt from the publication of Procedurally Taxing, published August 24, 2021, and it is very instructive concerning the importance of the Hardship factor in making Innocent Spouse claims.
Research of innocent spouse cases shows that proving financial hardship serves as the only way to guarantee that the taxpayer wins an innocent spouse case where knowledge is a negative factor. Lack of significant benefit, marital status, and compliance with return filing obligations are not enough to outweigh knowledge in some Tax Court opinions. Note that, in Sleeth (from the 11th Cir. this year), Ms. Sleeth was also said not to have proved financial hardship, and her case also involved only one negative factor (knowledge), and three positive factors (the ones in the prior sentence). Jacobsen’s positive factors included those from Sleeth, as well as an additional fourth positive factor — for his bad health.
In cases where knowledge is the only negative factor and there are three or more positive factors (one of which is lack of significant benefit), the taxpayer usually wins, but the taxpayer always wins if one of the positive factors is also financial hardship.