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Question:
MAY 21, 2013

Delinquent California Tax

California Franchise Tax Board threatens to levy my bank account for taxes I owe. How can I stop this? What are my options?

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Bill's Answer: Answered by Daniel Cohen

California, and other states, standardly use a few methods to collect delinquent tax debts. They primarily use:

  • Wage garnishments
  • Bank Levies
  • Liens on Property
  • Seizure of tax refunds due to the tax debtor

Installment Agreement

If you owe taxes in California and are not able to pay the entire amount due immediately, you should look into setting up a long-term payment plan. Visit the Installment Agreement - Individuals page to learn the terms and conditions that the State of California require. The basic requirements appear reasonable:

  • Owe a balance of $25,000 or less.
  • Agree to pay your account in 60 months or less.
  • Have filed all required personal income tax returns.

Contact the California Franchise Tax Board at the Web page linked to above or call (800) 689-4776 during business hours to learn more.

Not Collectible Status

If you are unable to commit to a monthly payment plan, speak to the CA FTB about "not collectible status." Not collectible status is granted temporarily if can prove a financial hardship. The debt continues to grow with interest and penalties, but your wage and bank accounts will NOT be garnished. Tax debts in California generally have a 20 year statute of limitations from the time that they are assessed. After 20 years, your responsibility to pay the tax debt expires. In some cases, certain actions lead to collection stays that suspend or extend the 20-year SOL. 

If you are unable to pay, there are two options to consider aside from not collectible status. California has a tax settlement program, the Offer in Compromise, that allows some taxpayers who lack the income and assets to pay off the debt to settle the debt for less than is owed.

Options to Reduce or Not Pay the Debt

Depending on how old your tax debt is and when you filed your returns, you may be able to legally discharge your responsibility to pay the taxes by filing for bankruptcy. The general rule for including California tax debt in a Chapter 7 bankruptcy, which wipes out your debt, is that the taxes must be due for three years, the return must be filed for at least two years, and the assessment has to have been in place for 240 days. Tax debt can be included in a Chapter 13 repayment plan, no matter how old or recent it is.

Lastly, any time a person is subject to a bank levy, it is smart to not keep a lot of money in the bank. A bank levy can hit at any time and the authority to levy the account is ongoing. That means you can be levied over and  over again, until the debt is paid. If you have a bank levy and are paid by direct deposit, either see if you can get your employer to switch to a paper check or pull the funds out immediately after they are deposited.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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Comments (9)


Clayton W.
Santa Maria, CA  |  May 17, 2013
I too just got a notice in the mail regarding unpaid taxes back in 2010 but haven't received any notices the last 3 years regarding it! Is there a way to check on if I owe additional taxes for 2011,12, and 13? So I dont get hit with these fees again?!
Bills.com
May 21, 2013
I recommend that you contact the California Franchise Tax Board directly, to find out the status of your 2011-2013 returns and whether there are any balances due. You can reach the CAFTB Taxpayer Assistance Line at 800-852-5711.
California V.
Davie, FL  |  March 26, 2012
I just received a letter from Chase stating not only had they placed a levy on my account for $3,200 but that they had also helped themselves to an additional $150 of my money for doing so. When I asked what this was about they said that the California Tax board had told them to do it and that I could reference the photo copy of the letter they attached. They said that because the name and social security numbers matched so I owe the money even though I didn't live in California (I live in Florida) and never lived in the "Tax Payer Address" they listed. They also I added that if it was a mistake they would not return my $150 either and I would need to try to get it back from the California Tax Board myself. Supposedly according to the California Tax Board they waited 16 years to collect interest without prior notice or any form of contact. They just took my money without even verifying if it was valid.

How can this be legal? Do we now live in a tyrannical communist country now? What ever happened to Due Process?
Bills.com
March 26, 2012
It is called "administrative offset," and this is a power granted to tax authorities, such as the IRS and the California Franchise Tax Board, and the Dept. of Education. It is intended to streamline collections from people who the tax authorities have been given enough opportunities to pay their taxes, and declined to do so. Congress and the President also thought administrative offset was a good remedy for delinquent federal student borrowers, too.

You did not ask, but implied in your comment is the question, "What can I do about this?" If you do not owe the taxes, in other words you described a terrible case of mistaken identity, then hire a lawyer who has tax litigation experience immediately. Ask your lawyer to demand the Franchise Tax Board return of the money it took, plus the $150 account levy fee, plus the attorney fees.
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California V.
Davie, FL  |  March 26, 2012
I spoke with the IRS and they have provided me with paperwork stating I never owed any money and when I forwarded the IRS' paperwork the FTB even admitted that the name reported to them was not mine but they were still taking the money while I prove to them what they know is not correct. They also said that they sent a letter to an unknown address in California 16 years ago and did not receive a reply, I am in Florida. So I asked how did you send a letter 16 years ago to California but was able to find my account in Florida, no comment from them. It is just more legal theft!
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James A.
Farmington, NY  |  April 25, 2012
the same thing is happening to me, I was in the marines from 2003-2007, always used government housing. In 2005 I got stationed in camp pendelton CA. I filed as a new york resident for 2005. Yet the CA tax board levied my personal bake account!!!! I was never a resident of that state!!! They just took my money!!! What do I do
Bills.com
April 25, 2012
James, the best first step is to speak directly with the California Franchise Tax Board (CAFTB). You can reach them at 800.852.5711. Their hours of operation are 7 a.m. to 5 p.m. Pacific Time, on weekedays.

If you make no progress on your own, consult with an Enrolled Agent with experience dealing with the CAFTB.
Nicole H.
San Francisco, CA  |  February 25, 2012
I just received a "Notice of Proposed Assessment" from the State of California for the tax year of 2008. From what I read online the statue of limitations to collect is four years. How convenient that they just sent me this notice--in the past four years I never received any notices about money being due. I've even received refunds from CA Franchise Tax Board several times over the past four years. What's the deal? Do they have a right to charge me interest on a past tax bill (which they have assessed incorrectly to begin with) when they never sent me notice to pay? Or did they intentionally wait four years to charge me the maximum interest? Sounds shady to me. Should I get in touch with a lawyer.? I just looked over the document I found online again and realized I read it wrong--yes, this is shady California tax practices. It states, "The law generally requires FTB to mail a proposed deficiency assessment to the taxpayer within four years after the filing date of the taxpayer's return." Thus answering my last question--they were legally not required to send me a notice anytime between 2008 and now and can charge four years of interest as allowed by law. Shady. If you have any other insight into this, I'd appreciate your input. Thanks for your input.
Bills.com
February 25, 2012
While it is not fair for you to suffer from an error made by the CA FTB, if that is what happened, it was not a conspiracy on their part to wait until the SOL would have expired on tax debt.

The SOL for CA FTB income taxes is 20 years. It used to be the case that there was no SOL, that the debt never expired, but that changed in 2006. The SOL starts to run from the date of the tax assessment. There are times we the SOL can run longer than 20 years for delinquent CA taxes. As the CA FTB states, the following exceptions apply:
  • The taxpayer/debtor is in bankruptcy plus six months.
  • The taxpayer/debtor is in an approved installment payment agreement.
  • The taxpayer/debtor is in serving in the military and in a combat zone.
  • The taxpayer/debtor is in child support collection plus 60 days.
  • We (CA FTB) postpone(s) collection because of a presidentially declared disaster or terroristic or military action.

I suggest that you speak to the CA FTB about abating the penalties that you were charged, due to not receiving timely notice. It may be the case however, that they just discovered a discrepancy in your 2008 tax return. If that is the case, your request for penalty abatement will likely fail and they are well within their authority to back-charge you for penalty and interest dating back to 2009, when the 2008 return was due.

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