Innocent Spouse & Registered Domestic Partner Relief
When you and your spouse or registered domestic partner (RDP) file a joint California tax return, you both assume joint and individual responsibility for the tax and any interest or penalty due, even if you later divorce or terminate the partnership. This is sometimes referred to as joint and several liability. The same is true when you and your spouse/RDP have an existing account with the State Board of Equalization (BOE).
However, if you were unaware of misdeeds or fraud committed by your spouse/RDP relating to tax liability, you might not be held liable on all or part of the balance due if you qualify for California’s Innocent Spouse/RDP Relief. Both the Franchise Tax Board (FTB) and the BOE offer Innocent Spouse/RDP Relief.
Franchise Tax Board
Through several categories, the FTB requires certain legal requirements to be met in order to qualify for Innocent Spouse/RDP relief:
- Relief from Additional Tax-There are several conditions to qualify for this option, including that you must be able to prove that when you signed the tax return, you did not know, or had no reason to believe, the liability would not be satisfied when the return was filed, meaning that, to the best of your knowledge, you and your spouse/RDP had the resources to pay the liability when you signed the return.
- Relief by Separate Allocation of Liability-Under this type of relief, the FTB reviews the joint tax return to determine which spouse/RDP is responsible for the tax, penalties and interest, by determining who earned and/or benefitted from the income. One of the conditions to qualify for this option is that you divorced, legally separated, terminated a registered domestic partnership, or lived apart for 12 months prior to making your request for relief.
- Equitable Relief Allowances-If you do not qualify for the previous two options, the FTB might determine, through an audit, opportunities for equitable tax relief. Equitable relief also applies to underpayment on your jointly filed tax return.
- Relief by IRS Determination-If the IRS has granted you innocent spouse relief, you might also be granted relief with the FTB. However, one does not guarantee the other.
- Relief from Community Income-If you did not file a joint tax return and failed to include community income on your separate tax return, you might be entitled to relief if you can prove that the unreported income was attributable to your spouse/RDP.
- Relief by Court Order-You might qualify for this relief if you obtained a divorce or termination of registered domestic partnership and the court issued an order relieving you of the unpaid tax due from a joint liability. Notably, a divorce document assigning responsibility for tax liabilities is not enough, on its own, to provide for innocent spouse relief.
- Relief from Return Tax-You might be entitled to this relief if you filed a joint tax return and the tax liability is not fully paid, and you show that you had no knowledge, or reason to know, of the nonpayment. Under this option, you are not entitled to relief on taxes already paid, and you will be required to pay taxes on your own income.
State Board of Equalization
All tax and fee account holders registered with the BOE as part of a husband-and-wife co-ownership or a registered domestic partnership account can request relief as an innocent spouse/RDP if some basic requirements are met:
- You must be divorced, legally separated, or terminated from your spouse/RDP. No longer living with a spouse/RDP also qualifies.
- You must show that you were not involved in the business during the liability period.
- You must show that you did not know of the tax or fee liability.
- You must show that you did not significantly benefit because the tax or fee was not paid. This is the hardest requirement to overcome because the BOE will look to your lifestyle during the period at issue.
Let Brown, PC Help
Applying for Innocent Spouse Relief can be complicated and intimidating. Do not do it alone. The tax attorneys at Brown, PC have extensive experience in dealing with California tax agencies as well as the IRS, and can guide you through the process. We represent clients in Los Angeles and throughout California. To discuss your matter, please contact the firm online or by calling 817-870-0025.