Hiding income and not paying tax

I don't think your best course of action would be legal action against your wife, but instead focusing on limiting your liability for her failure to file and her unpaid income tax.   When you file a joint income tax return, both parties are jointly and severally liable for any tax debts. That would mean that if the IRS and California Franchise Tax Board (FTB) were unable to collect the tax debt from your wife, they would attempt to collect all of the tax debt from you.  With that in mind it is probably best to file Married Filing Seperately and attempt to protect yourself from your wife's tax liability. Because California is a community property state the IRS and FTB may still try to assess her tax debts against you.  If, however, you have filed MFS you will have a much stronger argument against them assessing the tax liability against you.