Divorce is legally complex, but in California – a Community Property state – the tax implications can linger long after the papers are signed. A common nightmare scenario for Sacramento residents involves receiving a collection notice from the IRS or FTB for a tax debt incurred by an ex-spouse.

You might ask, “The divorce decree says he/she is responsible for the taxes, so why are they garnishing my wages?”

The hard truth: The IRS is not bound by your family court divorce decree. If you filed a joint return, you are “jointly and severally liable” for the tax. This means the IRS can collect 100% of the debt from you, even if your ex-spouse earned all the income and caused all the trouble.

The Solution: Innocent Spouse Relief (Form 8857)

Federal and state laws provide an escape hatch for this exact situation. Innocent Spouse Relief can completely absolve you of the tax debt, penalties, and interest if we can prove specific criteria.

The Three Types of Relief

1. Traditional Innocent Spouse Relief

Used when there is an “understatement of tax” (e.g., your ex failed to report income or claimed false deductions). We must prove that you did not know, and had no reason to know, about the error when you signed the return.

2. Separation of Liability Relief

This allocates the tax debt between you and your ex as if you had filed separately. This is often easier to prove for Sacramento residents who are already divorced or legally separated. You are only held responsible for the portion of the tax related to your own income.

3. Equitable Relief

If you don’t fit the categories above (for example, the tax was reported correctly but just not paid), we argue for Equitable Relief. We present a narrative showing that holding you liable would be unfair. We look at factors like:

• Economic Hardship: Would paying this leave you unable to pay rent in Sacramento?
• Abuse: Were you coerced into signing the return?
• Health: Were you suffering from physical or mental health issues at the time?

The California Community Property Trap

Dealing with the FTB adds another layer of complexity. Even if you filed separately, California law might presume half your spouse’s income is yours. We specialize in untangling these community property rules to protect your assets.

Do not pay for your ex-spouse’s mistakes. Let Kugelman Law file the petition to sever your tax liability once and for all.

Sacramento is a hub for the defense and aerospace industries, as well as federal agencies. For thousands of employees at Aerojet, Intel, or nearby Beale AFB, maintaining a security clearance is a strict condition of employment. Unfortunately, financial trouble is the number one cause of security clearance denial and revocation, falling under Guideline F: Financial Considerations.

Why the Government Cares About Your Taxes

The logic is simple: an individual with significant unpaid debt is viewed as a security risk because they may be vulnerable to bribery, coercion, or blackmail. Furthermore, a failure to file tax returns is seen as a “failure to follow the law,” which questions your reliability and trustworthiness.

If you have unfiled returns or a federal tax lien, you may receive a Statement of Reasons (SOR) or a Letter of Intent to Revoke your clearance. This is a career-ending crisis if not handled immediately.

The “Mitigating Conditions” You Need to Know

The Adjudicative Guidelines (SEAD 4) specifically list conditions that can mitigate security concerns. The most powerful one regarding taxes is:

“The individual has made arrangements with the appropriate creditor or otherwise initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.”

This means you do not have to pay the debt in full instantly to save your clearance. You must simply have a valid, active plan in place.

Our Strategy for Protecting Your Clearance

At Kugelman Law, we work with many clearance holders in the Sacramento region. Our strategy is two-fold:

1. Immediate IRS Resolution

We move fast to get you into a compliant status. This usually involves filing any missing returns immediately (even if you can’t pay the balance yet) and negotiating an Installment Agreement. Once the IRS accepts this agreement, the debt is considered “resolved” for the purposes of adjudication, even if you will be paying it off for years.

2. Documentation for the Adjudicator

We provide you with a legal opinion letter and a package of certified IRS transcripts showing that you are now in compliance. We explain the context of the debt—was it due to a divorce? A medical emergency? A business failure? Context matters. We help you frame the narrative that this was an isolated event, not a pattern of lawlessness.

Do Not Wait for the SOR

If you know you have tax issues and your reinvestigation window is approaching (every 5 years for Top Secret), you must act now. Self-reporting that you have fixed a tax problem looks infinitely better than the investigator finding it during a background check. Protect your career and your clearance by calling Kugelman Law.

For most Americans, the IRS is the ultimate bogeyman. But for residents of Sacramento, there is a creditor far closer to home and often far more aggressive: the California Franchise Tax Board (FTB). Headquartered right here in Rancho Cordova, the FTB has unique powers and digital systems that allow them to collect debts faster and more ruthlessly than their federal counterparts.

FTB vs. IRS: Why California is Tougher

The FTB’s collection system is highly automated. While an IRS Revenue Officer might take months to get around to your case, the FTB’s computer systems automatically issue levies as soon as a debt is finalized. Here are the key differences Sacramento residents need to know:

1. The Bank Levy Speed

The FTB issues levies against bank accounts frequently. Unlike the IRS, which usually sends a warning sequence, the FTB can issue a levy order that freezes your funds immediately. Banks in California are legally required to hold those funds for 10 days before sending them to the state. This 10-day window is your only chance to fight back. If we don’t intervene within those 10 days to prove hardship, that money is gone.

2. Wage Garnishment Limits

The FTB issues an “Earnings Withholding Order for Taxes” (EWOT). By default, they can take 25% of your disposable earnings. While this is sometimes less than what the IRS takes, it is persistent and difficult to stop without full financial disclosure.

3. Professional License Suspension

This is critical for Sacramento’s workforce. The FTB maintains a “Top 500 Delinquent Taxpayers” list, but even for smaller debts, they can notify state licensing boards. If you are a contractor, a nurse, a real estate agent, or a lawyer, the FTB can suspend your license to practice until you arrange payment. This creates a catch-22: you can’t work to pay the tax because they suspended your license for not paying the tax.

Navigating the FTB Bureaucracy

Because the FTB is local, many people try to visit the public counter or call, only to face bureaucracy. The FTB demands specific forms (like the FTB 3561) to evaluate your ability to pay. They scrutinize your expenses much more strictly than the IRS. For example, they often disallow expenses for private school tuition or high car payments that the IRS might let slide under certain “allowable living expense” standards.

How We Handle the FTB

At Kugelman Law, we have extensive experience dealing specifically with the Sacramento FTB agents. We know how to:

• Negotiate Hardship Stays: Stopping collections for 6-12 months if you are in financial distress.
• Set Up Installment Agreements: Creating a payment plan that fits your budget, which automatically releases potential license holds.
• Protest Proposed Assessments: If the FTB is basing your tax bill on incorrect information (like a federal IRS audit that was wrong), we can file a protest to pause the assessment before it becomes a final debt.

Do not ignore letters from the FTB; it does not go away. Contact us to build a firewall between your assets and the state.