California FTB - Franchise Tax Board Help
If you have been contacted by the Franchise Tax Board regarding a tax debt, we can help. The FTB can file a SFR (Substitute for Return) lien, levy, and garnish your bank account and wages for unpaid taxes. We can stop all that.
The Franchise Tax Board is responsible for administering two of California's major tax programs: Personal income tax and the corporation tax. The Franchise Tax Board also have responsibility for administering the Homeowner and Renter Assistance (HRA) program, and other non-tax programs and delinquent debt collection functions, including child support debt collections and delinquent vehicle registration debt collections on behalf of the Department of Motor Vehicles.
The Franchise Tax Board Levied My Bank Account!
Almost every day we have people call and tell us the "franchise tax board took money out of my account." If the Franchise Tax Board levied your bank account, please call us immediately for a free consultation about your options to get your money returned to you, as well as stop further levies from happening.
Priority One: Stopping Enforced Collections such as a Franchise Tax Board Bank Levy
Franchise Tax Board Levy Laws
The Franchise Tax Board will issue warrants for enforcement of liens and collection of amounts due. A Notice of Levy, rather than a warrant, will be used to levy on money, or your right to receive money, or money held or controlled by the tax debtor or by a third party.
IMPORTANT NOTE: The FTB is very aggressive about levying bank accounts. If you have received a warning that the FTB may levy assets, call us immediately! Every day we see people and business work to resolve a tax problem until the last minute - when it is too late. Please please save yourself time, money, and stress by calling us before not after you have been levied. We can sometimes reverse a levy, but not always. It's easier to prevent a FTB bank levy than to reverse, though it can be done.
Franchise Tax Board Legal Order to Withhold (Garnish or Levy)
An Order to Withhold (OTW) is a legal order by the FTB issued to collect a business entity’s delinquent tax debt. It is also known as a bank garnishment or bank levy. When the Franchise Tax Board issues a bank levy, it's crucial to get immediate help because the bank is required to hold the money in trust before sending it to the FTB. This is to allow you time to get professional help and dispute the bank levy. Once engaged, we will contact the FTB and the bank, and stop the transfer of money to the FTB. The goal is instead to get the FTB to live the bank levy and have the bank return the money to your bank account.
Stopping the Franchise Tax Board bank levy and getting the money returned to you is just step one. Step two is to make sure that the FTB doesn't levy your bank account again. In order for this to happen, we need to negotiate on your behalf for a permanent solution to the tax problem. As such we need to:
- Verify the amount owed (if any) is what the Franchise Tax Board says it is. Quite often the FTB is claiming a higher amount of taxes owed than is the actual amount due to an SFR (Substitute for Return - see above).
- Verify the interest and penalty calculations that the Franchise Tax Board has assessed. This is a common source of why tax bills are larger than expected.
- Negotiate a formal arrangement with the Franchise Tax Board for resolving the outstanding tax issue.
Collection Action Notification:
Before collection actions are taken (such as a California Franchise Tax Board Levy) on a delinquent tax account the FTB mails a notice of collection action. This notice describes the tax liability, your rights to contest the liability, the consequences of non-compliance, and the deadline to avoid collection actions.
If you have moved and did not contact the FTB to update your mailing address, the collection action notification satisfies the due process requirements if the FTB mailed it to your last known address - even if the U.S. Postal Service did not forward it to you. Unfortunately, updating your mailing address with the U.S. Postal Service does not update it with the FTB. You must also contact the FTB to update your address.
The FTB may seize your tax fund if you owe the BOE taxes. This is possible due to the Interagency Intercept Collection Program in conjunction with the State Controller’s Office. This program allows the FTB to redirect a refund owed to you to the BOE to offset or reduce your tax amount due the BOE.
Substitute for Return (SFR)
A substitute for Return is essentially the FTB filing a tax return for you when you have not filed one. The IRS does this as well. If it happens you to it's usually a big problem. The government tax a top-line guess about how much you earned. That means that any and all deductions that you have coming are not included. The result: a much higher tax bill than you should ever have. You can file an amended return still, but if you wait too long your time to do this can run out and then you are stuck, quite literally, with big wrong tax bill you are legally obliged to pay.
If you have had a Substitute for Return filed on you or your business by the FTB, talk to a tax professional immediately. A SFR filed by the Franchise Tax Board is a big step down a bad path.
Liens filed by the California FTB
A lien is a legal claim against real or personal property to secure a debt. If you have a delinquent tax balance, the FTB may record a lien to secure your tax debt.
The lien encumbers your California property, preventing you from refinancing, selling, or transferring it through escrow. In addition, credit bureaus monitor public records for recorded liens. If the FTB records a lien against you, the credit bureaus list it on your credit bureau reports (CBR). This may prevent you from conducting various financial transactions that would increase your debts - such as buying property or obtaining additional credit.
A FTB lien expires ten years from the date the notice was recorded, unless they extend the lien. If a lien expires, the FTB does not send a lien release since it no longer legally exists.
- A lien negatively impacts your credit. It may prohibit your ability to purchase, sell, refinance, or transfer real property, along with securing loans for other assets or debts
- The Notice of State Tax Lien and Release of Lien become public information after being recorded at a county recorder’s office or filed with the California Secretary of State. The credit bureau agencies get the information from either the county recorder or California Secretary of State and report it on your credit bureau report.
- A tax lien may affect your ability to gain and retain employment, as some companies and agencies check credit and/or public records in the employment screening process
Inability to Pay
If you owe, but cannot pay your taxes by the due date, you should still file your return on time and pay as much as you can. Although there are penalties for late payment of tax, the penalty for late filing of the return is usually higher. After your return is processed, the Franchise Tax Board will send you a bill including penalties and interest.
If you are unable to pay the balance in full by the due date on your notice, you are required by state tax code to complete a Request for Installment Agreement. You may also request an installment agreement online if you:
- Owe a balance of $10,000 or less
- Agree to pay your account in 36 months or less
- Have filed all required personal income tax returns
- Agree to pay by electronic funds transfer
- Make monthly payments of $25.00 or more
- File all future tax returns on time
- Pay all future tax balances when the are due
Interest and penalties charged on late filings and payments
If a tax is not paid by the original due date the FTB charges interest on the balance due. Interest compounded daily. If interest is canceled, it is called an "abatement." Interest cannot be abated, except where the tax code provides an exception.
An underpayment penalty will be charged when taxes are not paid by the due date. The penalty is 5 percent of the unpaid tax as of the due date plus 1/2 of 1 percent each month, or part of a month the tax remains unpaid, not to exceed 40 months. The maximum penalty is 25 percent of the total unpaid tax. A delinquent penalty will be charged on unpaid taxes if a return is filed late. The penalty is 5 percent of the unpaid tax due for every month that the return is late, up to a maximum penalty of 25 percent of the unpaid tax. The minimum penalty is $100 or 100 percent of the unpaid tax, whichever is less. There are also other penalties that can be imposed such as for a check returned for insufficient funds, negligence, substantial understatement of tax and fraud. Interest will be charged on any delinquent or late payment from the original due date of the return to the date paid. In addition, if other penalties are not paid within 15 days of the date of the notice, interest will be charged from the date of the billing notice until the date of payment. Interest compounds daily and the interest rate is adjusted twice a year.
Circumstances for Abatement with the California FTB
- Financial hardship for individuals
- Erroneous refund for individuals and business entities
- Reliance on formal written advice for individuals and business entities
- FTB/IRS error or delay for individuals and business entities
Offer in Compromise
You may be able to settle your tax debt for less than is owed. This is done with an Offer in Compromise. An offer in compromise is a complex process. You should get professional help in determining if it is right for you.
Personal Assessment for Business Tax
You may be held personally responsible for your business' tax debt. For instance, sometimes business officers receive excessive funds or other assets from a business, preventing it from paying its tax debts. When this occurs, the officers may become personally liable for the tax debt. You can read more here about business tax relief
Franchise Tax Board
In general, California tax code conforms to the Internal Revenue Code (IRC) as of January 1, 2005. However, there are continuing differences between California and federal tax code. These differences may require taxpayers to make adjustments to figures from their federal returns. Certain specific areas of nonconformity are discussed in the affected tax forms instructions.
Power of Attorney with the California FTB
A power of attorney is a legal document that allows someone else to act on your behalf in matters you specify in the power of attorney document. The state of California accepts the FTB-392 Power of Attorney for this purpose.
Below are links to information on California's other two taxing authorities: