I’d like to talk about is California Innocent Spouse Claims. Innocent Spouse in California operates much on the same level that it does on the federal level is when you have a spouse who legitimately was unaware of the circumstances giving rise to a liability and it would be unfair to hold the spouse in question liable for said liability, then California in limited circumstances will grant innocent spouse relief to a taxpayer.
In situations where innocent spouse relief is granted, it is important to realize that there really has to be a complete level or as much of a complete level as possible of deniability on the part of the spouse in question. Much like the federal system, if the spouse in question benefited off the lifestyle that was attributable to the nonpayment of taxes, then it’s going to be very difficult for the government to accept that she’s not a culpable party. In addition, particularly with California, California really scrutinizes its innocent spouse claims. It goes through a much greater level of detail than on the federal level. There’s usually, in most cases, a much more exhaustive production of documents and sort of a back and forth in answering questions and it’s much more of an administrative process than with the IRS because there’s also no real formal appeals process with respect to– like an IRS appeal system.
Innocent Spouse Claims can take a lot longer to resolve because it has to go through a couple of different levels in order to get the claim approved. Innocent Spouse Claims take a lot of time. They are particularly time-consuming but in the end, if you’ve got a good set of facts, if your particular spouse didn’t know about the liability, particularly in business cases if she wasn’t involved in the business or was more of a creative person versus the person who controlled the finances, then that’s a really good way to discharge a liability in California. It’s always better to get a liability discharge on an innocent spouse level than through dealing with and offer a compromise or collections level, generally speaking.
You want to try and go through the part of the analysis that has to do with the facts versus the part of the analysis of whether or not the taxpayer can pay given all the challenges that I’ve explained earlier on dealing with collections issues in California. Innocent Spouse is a good avenue of relief, dependent on the facts that you have and it’s certainly something that I would recommend considering if you’ve got a situation that would warrant an Innocent Spouse Claim.