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Innocent Spouse Relief & Actual Knowledge

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Innocent Spouse Relief

This is the most commonly known form of relief, which can absolves a taxpayer from liability if their spouse or former spouse either did not report income, made an error in the calculation of income, or misapplied any deductions or credits that they were not entitled to.[1] Innocent Spouse Relief relieves a person of any tax, interest, and penalties associated with the account based on the preceding errors. However, the taxpayers are still held jointly and severally liable for any amounts that are not granted innocent spouse relief. The following requirements must be met in order for innocent spouse relief to be granted.

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Theory of IRS Innocent Spouse Relief

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Because of certain benefits that filing jointly allows, many married taxpayers elect to file joint returns. However, filing a joint return carries the added burden of both parties being liable for the tax due. In addition, under the Internal Revenue Code, married taxpayers who file jointly are each liable for any additions to the tax, penalties, or interest associated with the account.[1] This is a concept in the law known as joint and several liability, meaning that the spouses are responsible for any tax liabilities together (jointly) but can be held responsible for them as individuals (severally).

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Independent Contractor Reclassification Audit

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The Employment Development Department in California has been particularly aggressive in the area of independent contractor reclassification audits. In the eyes of the Employment Development Department, California businesses have been abusing the system by treating workers who should be classified as employees as independent contractors. In doing so they shift the burden for payroll taxes onto the worker and avoid their own contributions to the payroll tax and unemployment insurance system. As a result, the Employment Development Department has been particularly vigilant in auditing businesses for perceived abused of the system. Often these independent contractor reclassification audits can be costly for businesses.

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Types of Fraud

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However, financial statement manipulation is simply on the edge of the fraud landscape. Much more common are asset misappropriations. The three basic types of asset misappropriations are skimming, larceny and fraudulent disbursements. Skimming and larceny occur when cash is taken directly from the employer, the difference between the two being that skimming occurs before the cash has a chance to be reported. Fraudulent disbursements are a way of scamming the corporation into giving the fraudster payments. Fraudulent disbursements are one of the more popular method of fraud and are implemented in a number of different ways. False billing and payroll schemes are the most common according to the text. Shell companies or ghost employees are often used to make the organization distribute payment with minimal expose outside of the immediate system. In more some of the more complicated cases, corruption in all forms is prevalent. Bid rigging, kickbacks and bribes are all forms that corruption can flourish in the corporate environment. The best way to combat this is through a combination of increased security measures working in conjunction with one another to best prevent organization fraud. While the two organizations should have some overlap and maybe some shared responsibility, one is not a substitute for the other. Both are critical to maintaining the proper level of internal controls necessary to prevent fraud

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Government Response to Corporate Fraud

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I next want to discuss the history of the governmental response and the more noteworthy commentary on corporate culture in the last thirty years. Although measures to prevent corporate crime were in effect before the 1980s, one of the more sufficient events was the formation of COSO in 1985. COSO is the Committee of Sponsoring Organizations, a volunteer group formed by the major accounting, finance, and other professional organizations. The committee reviewed instances of fraud and made key recommendations to improve reporting and internal controls. Among these were having an audit committee composed entirely of independent directors, developing a written code of ethics, and recommending that the SEC have new power to bar or suspend those involved in fraudulent financial statement reporting. In addition, COSO established a framework for an effective internal control program, which has become the standard framework for many companies in the United States. The authors next detail the Sarbanes-Oxley Act of 2002, which created the Public Company Accounting Oversight Board and established other procedures and safeguards. Sarbanes-Oxley vastly increased the requirements and protocols for publicly traded companies, as well as creating new laws in the areas of securities fraud, white-collar crime, and whistleblower protection.

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On Corporate Fraud

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Corporate fraud has always been one of the scourges of civilized society, although in the past decade we have witnessed unprecedented levels of greed in corporate culture. The past decade has been marred by Enron, WorldCom, Adelphia and many others, as fraud shrinks our economy by approximately six percent. Watchful eyes cannot be everywhere at all times, but often the problem is that the individuals responsible for oversight lapse on their duty of independence. In response, wide scale reform has been passed into law as the government tries to combat the problem on all fronts. However, even the most stringent reforms, reporting requirements, and penalties do not deter all fraudulent behavior within the corporate environment. I want this series of articles to serve as reference point for a variety of individuals, since fraud is a serious concern whose aftershocks can be felt well outside of the company. Thoroughly understanding and utilizing the methods contained in this book will help combat the challenges we now face today in the work place.

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California Bank Levy Release

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california bank levy release

When a California taxpayer fails to make proper tax payments, the Franchise Tax Board can take a number of actions against them.

One of these measures includes initiating a California bank levy against the taxpayer, which is a seizure of their assets in their bank account. The only way to prevent this is to obtain a California bank levy release.

One important thing to note is that a levy on the assets in your bank account is one method that the California Franchise Tax Board has as a means of ensuring taxpayer compliance. However, in cases where the Franchise Tax Board initiates a California bank levy, it is important to be aware of the proper tax procedure that is involved and what steps must be taken before funds are appropriated by the Franchise Tax Board.

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Franchise Tax Board Lawyer Hiring Criteria

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First, I want to state that I don’t believe everyone needs a franchise tax board lawyer to handles their California state tax issues. One of the main reasons that I started blogging was to help people. I wanted to motivate “self-help” style legal solutions by taking the knowledge that I had an as an attorney and making it available on the web. Indeed, if you take the time to read much of what I have written on the blog, you can almost become as knowledgeable as I am on many of these same subjects (although I have an experience edge dealing with this stuff in practice).

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