If the California Franchise Tax Board determines you have a balance due, they can garnish your wages, file and record a lien against your property, seize your assets, and levy your bank accounts. If you owe taxes to the FTB, the following information will help you understand the agency’s collection process.
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Avoiding State of California Franchise Tax Board Enforcement Action
The California Revenue and Taxation Code (R&TC) provides authority for the Franchise Tax Board to take involuntary collection actions when taxpayers are delinquent in paying their state income tax. You can prevent involuntary collection actions if you:
• Pay your tax liability in full.
• Enter into an installment agreement.
• File required tax returns and pay the balance due or provide proof that you have no filing requirement.
• Make an Offer in Compromise that they accept.
• Establish that a financial hardship prevents you from paying your liability, also known as Currently-Not-Collectible
If you do not pay your entire California income tax liability by the time it becomes due and payable, the unpaid amount is subject to a state tax lien. The California Franchise Tax Board may record a notice of state tax lien in the county recorder’s office of the county in which you live or own real property and file a notice of state tax lien with the California Secretary of State. If the FTB records or files a notice of state tax lien, you can get it released by paying the total tax liability (including any penalties, accrued interest, and fees) for the tax years represented by the lien. The FTB records a certificate of release in the office of the county recorder where they recorded the notice and/or file the release with the California Secretary of State no later than 40 days after you pay the liability. If you pay by check, the 40-day period does not begin until your financial institution honors the check. Unfortunately, the FTB sometimes records or files a notice of state tax lien in error. If this happens to you, you or your tax representative must call or write to the FTB and explain the error. If the FTB agrees with you, they will send a notice to the applicable county recorder’s office and/or to the Secretary of State and to credit reporting companies stating that they recorded/filed the notice in error. Learn how we routinely protect our clients from State tax liens here.
Bank, Wage, or Other Levies
The California Franchise Tax Board has the right to the seize and sell real and personal property pursuant to a warrant, and issue orders to withhold (also known as levies) and withholding orders for taxes (wage garnishments). If the FTB takes your property and you believe their action is improper, you have a right to a hearing. To request a hearing, you or your tax representative must call or write them to explain why their action is improper. During the hearing, you should provide information that demonstrates the need to change or withdraw the levy or stop the sale of your property. You may also file a claim for reimbursement of charges and fees caused by an erroneous levy, processing action or collection action by the FTB, provided you do so within 90 days of the erroneous action. Learn how we often get levies released or reduced within 24 hours here.
Interest accrues on unpaid taxes from the original due date of the return until the date the California Franchise Tax Board receives full payment. Interest accrues on penalties from the effective date of the penalty until the date the FTB receives full payment. To find current and prior California interest rates, go to ftb.ca.gov and search for interest rates. For IRS interest rates, click here. Learn how we pursue the elimination of penalties and interest on every case here.
Installment Agreement Rejection
If the California Franchise Tax Board rejects your request for an installment agreement, they will send you a
notice stating the reason for the rejection. If you believe the rejection is improper, you or your tax representative can call or write the FTB to explain why. The FTB generally may not levy your property during the 30-day period after they reject an installment agreement and during a review of that rejection, if you request a review within 30 days of the rejection. Learn how we establish payment plans for our clients here.
If you do not pay your entire income tax liability by the time it becomes due and payable, the unpaid amount could be satisfied by interception of funds due to you from the federal government, other states, or other California state agencies. If you do not believe you owe this debt, you or your tax representative must contact the California Franchise Tax Board within 30 days from when you first receive a Return Information Notice or Statement of Tax Due to prevent possible interception. Learn how we protect your rights and assets here.
Claim for Refund – Time Limit
There is a time limit to request a refund from the California Franchise Tax Board. Generally, you can file a refund claim until the latter of four years from the due date of your tax return, or one year from the date of overpayment. In most cases, you may only request a refund when you have paid the full amount due. For claims filed on or after January 1, 2002, even if you have not yet paid the amount due in full, you can file an informal refund claim within the time frames indicated above. An informal claim will protect your right to file an appeal with the California State Board of Equalization or to file suit against the FTB in court until you have paid the total amount due. However, amounts paid more than seven years ago cannot be refunded. To check your refund status in the State of California, click here.
California Franchise Tax Board Fees and Penalties
Late Filing Penalty
If you do not file your tax return by the extended due date, the California Franchise Tax Board imposes a penalty of 25 percent of the amount due, after applying any payments and credits made on or before the original tax return due date. The FTB imposes the penalty from the original due date of the tax return. For a tax return that shows a balance due, the minimum late filing penalty is $135 or 100 percent of the tax due after applying timely payments and credits, whichever is less. Learn how we pursue the elimination of penalties and interest on every case here.
Late Payment Penalty
The California Franchise Tax Board imposes a penalty if you do not pay the total amount due shown on your tax return by the original due date. The penalty is 5 percent of the unpaid tax (underpayment), plus 0.5 percent of the unpaid tax for each month or part of a month it remains unpaid (monthly). The maximum penalty is 25 percent of the unpaid tax. Learn how we pursue the elimination of penalties and interest on every case here.
Estimated Tax Penalty
The California Franchise Tax Board imposes a penalty if you do not pay, pay late, or underpay an estimated tax installment. The FTB calculates the penalty on the unpaid amount from the due date of the estimated tax installment to the date they receive your payment or to the due date of the tax return, whichever is earlier. Learn how we pursue the elimination of penalties and interest on every case here.
Mandatory e-Pay Penalty
Beginning on or after January 1, 2009, taxpayers became required to remit all tax payments electronically, regardless of the taxable year for which the payment applies, once any estimated tax or extension payment exceeds $20,000, or their tax liability exceeds $80,000 for any taxable year beginning on or after January 1, 2009. Failure to comply with this requirement will result in a penalty of 1 percent of the amount paid, unless your failure to pay electronically was for reasonable cause and not willful neglect. Learn how we pursue the elimination of penalties and interest on every case here.
Dishonored Payment Penalty
The California Franchise Tax Board imposes a penalty if your financial institution does not honor a payment you make to the FTB by your check, money order, or electronic funds transfer. For a payment of $1,250 or more, the penalty is 2 percent of the payment amount. For a payment less than $1,250, the penalty is $25 or the payment amount, whichever is less. Learn how we pursue the elimination of penalties and interest on every case here.
Demand to File Penalty
If the California Franchise Tax Board sends you a demand to file your income tax return or to provide them with information, and you do not comply, they impose a penalty of 25 percent of the tax on their assessment before applying any payments or credits. Therefore, you may owe penalties and interest even if your tax return shows that a refund is due. The demand to file penalty is in addition to the 25 percent late filing penalty stated above. Learn how we pursue the elimination of penalties and interest on every case here.
All tax relief clients are expertly served by our:
- Enrolled Agents
- Former IRS Auditors
- Former IRS Collection Officers
Since we’ve handled thousands of tax relief cases in the past, we know how to get the best results for you. We will negotiate a deal that is fair and affordable for you while simultaneously preserving your taxpayer’s rights. As seasoned tax professionals that specialize in State and IRS Tax Relief matters, we know how the Franchise Tax Board collection system works and how to protect you and your assets.
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