In the case of Panetta v. Commissioner, TC Summary Opinion 2015-16, the Tax Court did not have sympathy for a taxpayer claiming innocent spouse relief when:

• The underpayment arose from excess expenses claimed in the business she ran and
• She failed to review the returns prepared by her ex-husband before they were filed

The Court described Ms. Panetta’s involvement with the 2009 return as follows:

During Ms. Panetta’s marriage Mr. Frazier was responsible for filing the tax returns. She would give him information, and he would prepare each return and file it electronically. He would then save the return on their computer. Their practice did not change in 2009; and although she had access to the return, she did not review it.

Ms. Panetta attempted to avoid liability for the tax in question by filing an election under IRC §6015(c).  However, IRC §6015(c)(3)(C) provides that an election under that provision will not cause the applicant to be relieved of liability if “individual making an election under this subsection had actual knowledge, at the time such individual signed the return, of any item giving rise to a deficiency (or portion thereof) which is not allocable to such individual under subsection (d), such election shall not apply to such deficiency (or portion).”

Ms. Panetta apparently believed this was not a problem because she simply signed the returns and did not actually look at them—in that case it would seem that she wasn’t aware because, effectively, she wasn’t aware of anything about the return aside from where she signed her name.

However the Court didn’t see it that way.  In denying relief the Court noted:

Although respondent largely focused on the incorrect standard under section 6015(c), the record shows that Ms. Panetta had actual knowledge. Ms. Panetta is the owner of Sweetbites, and she knew she was incurring expenses related to her business during the years in issue. More importantly, she knew that she had not incurred certain expenses that her husband reported on the returns. As she testified at trial, once she reviewed her returns, she immediately recognized that some of the deductions were incorrectly reported. Her 2009 return was easily accessible to her, and she had access to a draft of the 2010 return. If she had reviewed the returns earlier, we have no doubt that she would have spotted the errors. Accordingly, because Ms. Panetta had actual knowledge of the facts underlying the disallowed deductions, we find that she had actual knowledge of the items giving rise to the deficiencies and she is not entitled to relief under section 6015(c).

For the taxpayer in this case, clearly ignorance was not bliss.  Rather the Court effectively found that had she done her duty and reviewed a return that she was signing under penalties of perjury, she would have been aware of the problem.  Thus the Court did not reward her what might be argued to be an abandonment of her personal responsibility to review the return that she was signing.