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.

IRS Phone Scams Run Rampant - Tips to Keep Your Client Protected

The IRS has been issuing a number of alerts about telephone scams. I have personally had at least two clients who have been targeted by these phone scammers. Lucky for them I was able to warn them not to call them back and the phone scammers were unable to defraud my clients. Unfortunately, thousands and thousands of other people across the US have been the victims of these extremely slick phone scammers. They have defrauded people out of millions of dollars.

How it works is the scammers call people on their cell phone and home phones claiming to be employees of the IRS. They often demand money to pay taxes and threaten people by saying if you don't immediately pay they are going to seize their assets or have them arrested. Some may try to con you by saying that you're due a refund. The refund is a fake lure so you'll give them your banking or other private financial information. Don't be fooled by these scammers.

I have personally talked to the scammers after they have reached out to my clients. They have real phone numbers and when you call them back they answer as if they were working for the IRS. They can sound convincing when you talk with them because they may even know a lot about you.

They may alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS badge numbers. If you don't answer, they often leave an “urgent” callback request.

The IRS has created a list of five things the scammers often do but the IRS will not do. So if any one of these five things occurs it is a sign that it is a scam.

The IRS will never:

1. Call you about taxes you owe without first mailing you an official notice.

You always receive a notice assuming the IRS has your current mailing address. You should make sure your current address is on file with the IRS if for no other reason so you know if the phone call is a scam.


2. Demand that you pay taxes without giving you the chance to question or appeal the amount they say you owe.

3. Require you to use a certain payment method for your taxes, such as a prepaid debit card.

4. Ask for credit or debit card numbers over the phone.

5. Threaten to bring in local police or other law-enforcement to have you arrested for not paying.

So if you get a phone call from someone claiming to be from the IRS and asking for money, here's what to do:

•If you know you owe taxes or think you might owe, call the IRS at 800-829-1040 to talk about payment options. You also may be able to set up a payment plan online at IRS.gov. You can also contact your tax professional and have them look into this for you.

•If you know you don't owe taxes or have no reason to believe that you do, report the incident to TIGTA at 1.800.366.4484 or at www.tigta.gov. The Treasury Inspector General for Tax Administration (TIGTA) was established under the IRS Restructuring and Reform Act of 1998 to provide independent oversight of IRS activities.


•If phone scammers target you, also contact the Federal Trade Commission at FTC.gov. Use their “ FTC Complaint Assistant ” to report the scam. Add “IRS Telephone Scam” to the comments of your complaint.

The IRS currently does not use unsolicited email, text messages or any social media to discuss your personal tax issues. If you would like more information on reporting tax scams, or if you have been the victim of IRS identify theft or believe that your information may have been compromised, you can contact the Wilson Tax Law Group at 714-463-4430. At Wilson Tax Law our attorneys have experience in these matters and can assist to get you through this process.

IRS Phone Scams Run Rampant - Tips to Keep Your Client Protected

The IRS has been issuing a number of alerts about telephone scams. I have personally had at least two clients who have been targeted by these phone scammers. Lucky for them I was able to warn them not to call them back and the phone scammers were unable to defraud my clients. Unfortunately, thousands and thousands of other people across the US have been the victims of these extremely slick phone scammers. They have defrauded people out of millions of dollars.

How it works is the scammers call people on their cell phone and home phones claiming to be employees of the IRS. They often demand money to pay taxes and threaten people by saying if you don't immediately pay they are going to seize their assets or have them arrested. Some may try to con you by saying that you're due a refund. The refund is a fake lure so you'll give them your banking or other private financial information. Don't be fooled by these scammers.

I have personally talked to the scammers after they have reached out to my clients. They have real phone numbers and when you call them back they answer as if they were working for the IRS. They can sound convincing when you talk with them because they may even know a lot about you.

They may alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS badge numbers. If you don't answer, they often leave an “urgent” callback request.

The IRS has created a list of five things the scammers often do but the IRS will not do. So if any one of these five things occurs it is a sign that it is a scam.

The IRS will never:

1. Call you about taxes you owe without first mailing you an official notice.

You always receive a notice assuming the IRS has your current mailing address. You should make sure your current address is on file with the IRS if for no other reason so you know if the phone call is a scam.


2. Demand that you pay taxes without giving you the chance to question or appeal the amount they say you owe.

3. Require you to use a certain payment method for your taxes, such as a prepaid debit card.

4. Ask for credit or debit card numbers over the phone.

5. Threaten to bring in local police or other law-enforcement to have you arrested for not paying.

So if you get a phone call from someone claiming to be from the IRS and asking for money, here's what to do:

•If you know you owe taxes or think you might owe, call the IRS at 800-829-1040 to talk about payment options. You also may be able to set up a payment plan online at IRS.gov. You can also contact your tax professional and have them look into this for you.

•If you know you don't owe taxes or have no reason to believe that you do, report the incident to TIGTA at 1.800.366.4484 or at www.tigta.gov. The Treasury Inspector General for Tax Administration (TIGTA) was established under the IRS Restructuring and Reform Act of 1998 to provide independent oversight of IRS activities.


•If phone scammers target you, also contact the Federal Trade Commission at FTC.gov. Use their “ FTC Complaint Assistant ” to report the scam. Add “IRS Telephone Scam” to the comments of your complaint.

The IRS currently does not use unsolicited email, text messages or any social media to discuss your personal tax issues. If you would like more information on reporting tax scams, or if you have been the victim of IRS identify theft or believe that your information may have been compromised, you can contact the Wilson Tax Law Group at 714-463-4430. At Wilson Tax Law our attorneys have experience in these matters and can assist to get you through this process.

IRS Admits it has Been Disclosing Sensitive Taxpayer Information without Adequate Controls

The Treasury Inspector General for Tax Administration (TIGTA) found that some IRS contractor personnel without the appropriate background investigation had access to taxpayer and other sensitive but unclassified (SBU) information. TIGTA found that taxpayer data and other SBU information may be at risk due to a lack of background investigation requirements in five contracts for courier, printing, document recovery and sign language interpreter services. TIGTA found 12 more service contracts for which employee background checks were required by the contracts; however, some of the personnel did not have interim access approval or final background investigations before they began working on the contracts.

TIGTA made five recommendations to the IRS to ensure that the service contracts have security provisions included in the solicitation and contract, and that associated contractor personnel have appropriate interim access approval or final background investigation before working on the contract. In addition, TIGTA recommended that the IRS use the results of the contract reviews to train program office and procurement office staff on contractor security requirements and the necessity for contractor personnel to sign nondisclosure agreements prior to working on a contract. TIGTA also recommended that the Office of Chief Counsel work with the Department of Treasury Security Office to review the waiver currently in place that exempts expert witnesses from background investigations and to determine if the waiver is still appropriate given the current security environment.

The IRS agreed with four or the five recommendations. It disagreed with the recommendation that Chief Counsel work with the Department of Treasury with respect to the waiver that exempts expert witnesses from background investigations as it believes its current review is sufficient to address any security risks. I suppose if this was a baseball game the IRS's correction rate would .800. Unfortunately, the game here involves failure to protect taxpayer information. Thank goodness for TIGTA.

Contact the Wilson Tax Law Group if you believe your taxpayer data has been breached. 714-463-4430

IRS Admits it has Been Disclosing Sensitive Taxpayer Information without Adequate Controls

The Treasury Inspector General for Tax Administration (TIGTA) found that some IRS contractor personnel without the appropriate background investigation had access to taxpayer and other sensitive but unclassified (SBU) information. TIGTA found that taxpayer data and other SBU information may be at risk due to a lack of background investigation requirements in five contracts for courier, printing, document recovery and sign language interpreter services. TIGTA found 12 more service contracts for which employee background checks were required by the contracts; however, some of the personnel did not have interim access approval or final background investigations before they began working on the contracts.

TIGTA made five recommendations to the IRS to ensure that the service contracts have security provisions included in the solicitation and contract, and that associated contractor personnel have appropriate interim access approval or final background investigation before working on the contract. In addition, TIGTA recommended that the IRS use the results of the contract reviews to train program office and procurement office staff on contractor security requirements and the necessity for contractor personnel to sign nondisclosure agreements prior to working on a contract. TIGTA also recommended that the Office of Chief Counsel work with the Department of Treasury Security Office to review the waiver currently in place that exempts expert witnesses from background investigations and to determine if the waiver is still appropriate given the current security environment.

The IRS agreed with four or the five recommendations. It disagreed with the recommendation that Chief Counsel work with the Department of Treasury with respect to the waiver that exempts expert witnesses from background investigations as it believes its current review is sufficient to address any security risks. I suppose if this was a baseball game the IRS's correction rate would .800. Unfortunately, the game here involves failure to protect taxpayer information. Thank goodness for TIGTA.

Contact the Wilson Tax Law Group if you believe your taxpayer data has been breached. 714-463-4430

California—Property Tax: Solar Energy System Exclusion Extended

In California there are basically two ways that your property taxes can be reassessed at full market value. One is when you sell or purchase the real property. The second is if you have new construction or have a major addition to the real property. There are numerous tax incentives both in California and at the Federal level to promote green energy. One such incentive includes the California property tax rules which were amended to provide an exclusion from classification as newly constructed for the construction or addition of an active solar energy system. Thus, if you install a solar energy system on your rooftop that will not cause your property taxes to increases because of new construction. The exclusion however was set to expire in 2015-16. The good news is that the exclusion has been extended and now applies to property tax lien dates through 2023-24 fiscal year. Under the new amendments the exclusion is repealed January 1, 2025 (formerly 2017). Therefore, active solar energy systems that qualify for the exclusion prior to January 1, 2025 (formerly, 2017) will continue to be excluded on and after that date until there is a subsequent change in ownership. See S.B. 871, Laws 2014, effective June 20, 2014. This is great news for anyone interested in installing a solar energy system because your property tax base will not be reassessed at fair market value and it will continue to increase at no more than 2 percent per year under Proposition 13. That is as long as Proposition 13 does not get repealed or amended.

If you are an owner of real estate or solar energy provider in California and have questions about property taxes or other types of solar tax incentives, please contact the Wilson Tax Law Group. We can be reached 714-463-4430.