We previously discussed how the Board of Equalization handles tax liens. For this post in our series, we would like to talk about how the California Franchise Tax Board addresses the use of liens. There are differences between the way the various California tax agencies and the IRS use tax liens about which you need to take note to stay out of hot water.
The Franchise Tax Board (FTB) administers and enforces the individual and corporate income tax laws in California, including residents as well as non-residents who have an income from the State of California. The state income tax and property taxes are the purviews of the FTB, and it has the authority to record a notice of state lien for non-payment of state income tax in a county recorder's office.
Besides the difference in the area of tax responsibility, the FTB can garnish wages, while the BOE cannot. As mentioned, the FTB records liens for non-payment of state income tax or property tax, while the BOE records liens for non-payment of sales and use tax. Unlike the BOE, the FTB may record the lien with the office of the Secretary of State of California.
If you do not pay your entire state income tax liability by the time it becomes due and payable, the unpaid amount is subject to a state tax lien.
The Franchise Tax Board tends to dig a little deeper into a taxpayer’s business and life, requiring more disclosures and information than the IRS.
The FTB will record a lien against your property to secure the debt until it is completely paid off.
You can pay by:
Cash is not accepted.
If you think the FTB has filed a notice of state tax lien in error, you can dispute the lien by calling or writing the FTB. Additionally, if the FTB improperly seized your property, you have a right to a hearing and to file a reimbursement claim for charges and fees within 90 days of the erroneous action.
The Franchise Tax Board will use any and all legal authorized means to collect on an account. It can be more aggressive in its deadlines and collection methods than the IRS. The FTB also requires more information and other disclosures on your financial statement yet is slower to resolve issues because there are more levels of administrative review.
You can get the lien removed by one of three actions:
As with other tax agencies, the best way to get the lien released is by paying all taxes, penalties, and interest in full. You can do so through an installment plan, or if you have the cash, pay the debt outright.
If you simply cannot pay, you can request relief or an Offer in Compromise. To get you through the situation, a knowledgeable tax attorney can help you through the process.
Our next post will take up how the Employment Development Department, also known as the EDD, uses tax liens to enforce compliance with the tax laws.
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