If you’re experiencing tax debt issues with the IRS, often debts are also owed taxes within the state of your residence. California is one such State that collects taxes from its residents on top of what they owe to the IRS. It’s also possible to have tax debt with the California Franchise Tax Board in the absence of any debt to the IRS. Just like the IRS, owing taxes to the CA FTB is a serious matter. It’s more than helpful to know your options if you’re a taxpayer that falls into this category. Those that owe more than $20,000 should consider contacting one of our Tax Attorneys. If you owe less than 25,000, you may benefit from a CA FTB tax debt forgiveness program. Take a look at your options below.
Options In CA FTB Tax Debt Forgiveness
As per current 2018 California tax law, residents that owe taxes to the FTB have 5 different options for dealing with tax debt. Understand that not every option offers CA FTB tax debt forgiveness, but they do provide a means of settling your tax debt.
- Offer In Compromise.
- Installment Agreement with Penalty Abatement if possible.
- Hardship Status.
- Pay the tax debt in full with Penalty Abatement if possible.
- Do nothing and see what happens with collections.
Leaving all the decisions to the CA FTB and their collection pursuits is rarely your best option. Like the IRS, the CA FTB has the power to issue tax liens that may result in property seizure as covered in the California Taxpayer’s Bill of Rights. The CA FTB will also garnish your paycheck and levy your bank account. Follow as we describe the other options in more detail.
CA FTB Tax Debt Forgiveness – Offer In Compromise
An Offer In Compromise is the best option for FTB tax debt forgiveness. A CA FTB Offer In Compromise is an agreement between yoiu and the CA FTB to settle the tax debt for less than the amount owed. Like the IRS, the CA FTB may accept an OIC if they believe it is the most they will be able to collect. You can consider it CA FTB tax debt forgiveness if your offer is accepted. They are more likely to accept an Offer In Compromise if you are older than if you are younger. We had one client who owed over $200,000 in CA FTB debt have his Offer accepted for $500. The CA FTB is going to look at your income, expenses, assets, and potential future income in their determination. If you owe more than $20,000 to the FTB it is strongly recommended to hire a tax professional to handle it for you.
CA FTB Installment Agreements
The California Franchise Tax Board does make Installment Agreements available to residents that owe back taxes. It’s not a form of tax forgiveness because you end up paying the full amount with interest and penalties combined. Installment Agreement requests done online are typically accepted as long as the amount owed is less than $25,000. In the online Installment Agreement request form, there is a financial disclosure section and taxpayers may propose a monthly payment amount.
Note that it is possible to make a request for a Penalty Abatement from the Franchise Tax Board. This is a form of CA FTB tax debt forgiveness, though you will have to provide good cause as to your inability to file and pay on time.
Can You File For Hardship With The CA FTB?
The CA FTB collections department will place your account into a hardship status if you qualify. You have to prove you cannot or can barely cover your basic living expenses based on reasonable expenses. The FTB will look at your expenses and determine if they are reasonable. If so and you are barely making it at the end of the month or in the red, your account can be placed into hardship status. The information is given by providing Form FTB 3561 and the supporting documents listed at the end of it.
The CA FTB hardship expires one year after the date of its approval in most cases. You can resubmit before the expiration of the hardship. The FTB has 20 years to collect on a debt in most cases. Time is ticking while in hardship, but it is a long way to expire. Most people qualified for hardship have a good chance at Offer In Compromise. Talk to a tax attorney to get an accurate assessment. We provide a free consultation.
Pay Your Tax Liability In Full
If you are able to come up with a means to pay your tax liability in full, it is usually in your best interest to do so. As long as it does not create an undue financial hardship for yourself or your dependents. The California Franchise Tax Board provides a full list of payment options on their website with links to each source. You can request a penalty abatement as well simultaneously for the penalty amounts. As of 2018 the CA FTB requires reasonable cause to get a penalty abatement (where as the IRS has a first time penalty abatement based on prior compliance.)
Conclusion – Offer In Compromise Is The Best Form of CA FTB Tax Debt Forgiveness
Offer In Compromise is the way to go if you qualify. The other options are there if you do not. If you don’t care to deal with the FTB alone or owe more than $20,000 in tax debt, contact one of our expert Tax Attorneys. We can’t promise CA FTB tax debt forgiveness, but we can promise that we will negotiate to secure for you the best deal legally possible. We can help with your IRS debt as well if you have any.