Taxpayer Prevails against the Franchise Tax Board after Ex-Spouse Attempts to Destroy her Tax Relief Case

Just like the IRS, the California Franchise Tax Board (FTB) also has a program to allow one spouse to be relieved of existing joint liabilities if that spouse can prove that she or he meets the requirements for "innocent spouse" relief. These types of cases whether at the IRS or FTB level can be hotly contested and the other ex-spouse can intervene and attempt to impede the determination to relieve the liability for the claimant spouse. In a recent case, McShea, California State Board of Equalization, No. 509192, April 22, 2014, released August 2014, a taxpayer demonstrated that the FTB erred in its denial of her request for innocent spouse relief from unpaid California personal income tax liabilities.

In the McShea case, the FTB initially granted the taxpayer complete equitable relief for 1993 and partial equitable relief for 1994. However, the taxpayer’s ex-husband appealed the grant of relief, arguing that they had agreed to share the tax liabilities for the tax years at issue. As a result, the FTB changed its position, determining that it had erroneously granted equitable relief.

In reviewing the case, the Board of Equalization determined that the following factors weighed in favor of reversing the FTB’s proposed action on appeal:

• the taxpayer’s marital status (divorced for at least 12 months prior to the date the innocent spouse determination was being made);

• the taxpayer’s compliance with the income tax laws in the years following the years for which relief was requested;

• the presence of severe domestic abuse during the taxpayer’s years of marriage;

• and the taxpayer’s lack of knowledge or reason to know, when she was ordered by a judge to sign the 1993 and 1994 joint returns in 2007, that her ex-
husband would not or could not pay the tax liabilities.

The FTB argued that the taxpayer could have clarified at the couple’s 2007 court hearing whether her ex-husband intended to remit payment for the 1993 and 1994 tax liabilities on or about the time he filed the 1993 and 1994 returns. However, the State Board of Equalization determined that due to the years of abuse and the taxpayer’s belief that she needed to sign the returns in order to receive the child support her ex-husband owed, the taxpayer was afraid to confront her ex-husband and the judge concerning the payment of the 1993 and 1994 tax liabilities at the time she signed the returns and, therefore, she did not know or have reason to know that her ex-husband would not or could not pay the tax liabilities.

This is a great result for the innocent spouse, especially in a situation where the ex-spouse intervened and attempted to persuade the tax authorities not to grant the innocent spouse relief. It is extremely important that when making a claim for innocent spouse that all the factors are considered and that the claimant is prepared to get into a heated battle with the ex-spouse. Sometimes the other ex-spouse does not intervene and sometimes the ex-spouse intervenes but only to help the innocent spouse obtain the relief being requested. So you really need to vet the situation prior to making the claim so that you are prepared to deal with all the possible scenarios. Innocent spouse relief is a powerful tool that can be used to abate the existing tax liabilities, thus in the appropriate circumstances, it should not be overlooked.

If you have questions or want to pursue this type of claim, you can contact the Wilson Tax Law Group at 714-463-4430. Our attorneys are experts in innocent spouse relief and can assist or advise you regarding these types of matters.

Taxpayer Prevails against the Franchise Tax Board after Ex-Spouse Attempts to Destroy her Tax Relief Case

Just like the IRS, the California Franchise Tax Board (FTB) also has a program to allow one spouse to be relieved of existing joint liabilities if that spouse can prove that she or he meets the requirements for "innocent spouse" relief. These types of cases whether at the IRS or FTB level can be hotly contested and the other ex-spouse can intervene and attempt to impede the determination to relieve the liability for the claimant spouse. In a recent case, McShea, California State Board of Equalization, No. 509192, April 22, 2014, released August 2014, a taxpayer demonstrated that the FTB erred in its denial of her request for innocent spouse relief from unpaid California personal income tax liabilities.

In the McShea case, the FTB initially granted the taxpayer complete equitable relief for 1993 and partial equitable relief for 1994. However, the taxpayer’s ex-husband appealed the grant of relief, arguing that they had agreed to share the tax liabilities for the tax years at issue. As a result, the FTB changed its position, determining that it had erroneously granted equitable relief.

In reviewing the case, the Board of Equalization determined that the following factors weighed in favor of reversing the FTB’s proposed action on appeal:

• the taxpayer’s marital status (divorced for at least 12 months prior to the date the innocent spouse determination was being made);

• the taxpayer’s compliance with the income tax laws in the years following the years for which relief was requested;

• the presence of severe domestic abuse during the taxpayer’s years of marriage;

• and the taxpayer’s lack of knowledge or reason to know, when she was ordered by a judge to sign the 1993 and 1994 joint returns in 2007, that her ex-
husband would not or could not pay the tax liabilities.

The FTB argued that the taxpayer could have clarified at the couple’s 2007 court hearing whether her ex-husband intended to remit payment for the 1993 and 1994 tax liabilities on or about the time he filed the 1993 and 1994 returns. However, the State Board of Equalization determined that due to the years of abuse and the taxpayer’s belief that she needed to sign the returns in order to receive the child support her ex-husband owed, the taxpayer was afraid to confront her ex-husband and the judge concerning the payment of the 1993 and 1994 tax liabilities at the time she signed the returns and, therefore, she did not know or have reason to know that her ex-husband would not or could not pay the tax liabilities.

This is a great result for the innocent spouse, especially in a situation where the ex-spouse intervened and attempted to persuade the tax authorities not to grant the innocent spouse relief. It is extremely important that when making a claim for innocent spouse that all the factors are considered and that the claimant is prepared to get into a heated battle with the ex-spouse. Sometimes the other ex-spouse does not intervene and sometimes the ex-spouse intervenes but only to help the innocent spouse obtain the relief being requested. So you really need to vet the situation prior to making the claim so that you are prepared to deal with all the possible scenarios. Innocent spouse relief is a powerful tool that can be used to abate the existing tax liabilities, thus in the appropriate circumstances, it should not be overlooked.

If you have questions or want to pursue this type of claim, you can contact the Wilson Tax Law Group at 714-463-4430. Our attorneys are experts in innocent spouse relief and can assist or advise you regarding these types of matters.

Former San Bernardino Accountant Sentenced to Four Years in State Prison for Income Tax Evasion

The San Bernardino Superior Court ordered an Apple Valley woman to pay restitution of approximately $962,000 to her former employer and more than $162,000 to the state representing the unpaid tax, penalties, interest, and the cost of the investigation. All income is taxable even embezzlement income. Raeanne Lacasse, 59, was sentenced to four years in state prison for three felony counts, including state income tax evasion and embezzlement with white collar crime enhancement. A San Bernardino construction company employed Lacasse between 2000 and 2010. Lacasse embezzled more than $1.1 million from her employer between 2006 and 2010 by issuing company checks to various third-party vendors for personal expenses and then reclassifying those checks as construction expenses. In addition, she forged payroll checks and deposited them into her personal bank accounts. The majority of the funds went to Lacasse’s home, car, and personal credit cards. Lacasse filed false personal income tax returns for 2006 through 2010, and failed to report more than $780,000 in embezzled income. All income is taxable including income from illegal sources. State tax crimes are often prosecuted by the local district attorney's office. In this case, the San Bernardino County District Attorneys Office prosecuted this case. The San Bernardino County Sheriff’s Department jointly investigated the case with the San Bernardino County District Attorney’s Office and their Criminal Investigation Bureau. It is unclear whether the Franchise Tax Board aided in the investigation, but I would assume that they did. If you have questions about a state tax crime, please contact the Wilson Tax Law Group.

Former San Bernardino Accountant Sentenced to Four Years in State Prison for Income Tax Evasion

The San Bernardino Superior Court ordered an Apple Valley woman to pay restitution of approximately $962,000 to her former employer and more than $162,000 to the state representing the unpaid tax, penalties, interest, and the cost of the investigation. All income is taxable even embezzlement income. Raeanne Lacasse, 59, was sentenced to four years in state prison for three felony counts, including state income tax evasion and embezzlement with white collar crime enhancement. A San Bernardino construction company employed Lacasse between 2000 and 2010. Lacasse embezzled more than $1.1 million from her employer between 2006 and 2010 by issuing company checks to various third-party vendors for personal expenses and then reclassifying those checks as construction expenses. In addition, she forged payroll checks and deposited them into her personal bank accounts. The majority of the funds went to Lacasse’s home, car, and personal credit cards. Lacasse filed false personal income tax returns for 2006 through 2010, and failed to report more than $780,000 in embezzled income. All income is taxable including income from illegal sources. State tax crimes are often prosecuted by the local district attorney's office. In this case, the San Bernardino County District Attorneys Office prosecuted this case. The San Bernardino County Sheriff’s Department jointly investigated the case with the San Bernardino County District Attorney’s Office and their Criminal Investigation Bureau. It is unclear whether the Franchise Tax Board aided in the investigation, but I would assume that they did. If you have questions about a state tax crime, please contact the Wilson Tax Law Group.