619-795-8000Southern California Franchise Tax Board Attorneys
Trusted Law Firm for FTB Tax Problems in Southern California
The California Franchise Tax Board (FTB) is the agency responsible for enforcing California’s income tax laws. The California Franchise Tax Board (FTB) is the agency responsible for enforcing California’s income and franchise tax laws, including audits, collection actions, and enforcement of delinquent tax liabilities. Income taxes collected make up a significant portion of the State of California’s revenue; the FTB aggressively pursues all tax payments to help maximize revenue.
The FTB is aggressive in its collection actions. Never make the mistake of ignoring an agency notice, as the consequences can be severe. Under California law, the FTB generally has up to 20 years to collect a tax liability once it becomes due and payable, compared to the Internal Revenue Service’s standard 10-year collection period under federal tax law.
FTB Collection Actions: The Sequence
The FTB follows a strict and often rapid timeline when moving from “notice” to “seizure.” The process typically begins with a Notice of Balance Due, which is sent after a tax return is filed or following an audit that concludes with an unpaid balance. If the debt remains unresolved, the FTB may issue a Personal or Business Income Tax Notice, warning that the delinquent amount is accruing interest. In some cases, a Notice of State Tax Lien is filed as a public record with the County Recorder or Secretary of State, which can encumber property interests and negatively affect personal or business credit.
If the balance remains unpaid, a Final Notice Before Levy is issued, informing the taxpayer that the FTB intends to seize assets unless the debt is addressed within the specified timeframe. This may be followed by an Order to Withhold (OTW), commonly known as wage garnishment, which allows the FTB to collect up to 25% of disposable earnings directly from an employer. In addition, the FTB may issue a bank levy, directing financial institutions to apply funds from accounts toward the outstanding tax liability.
Finally, if the debt remains unresolved and exceeds statutory thresholds, the FTB is required to publish the taxpayer on its ‘Top 500 Past Due Balances’ list, which may lead to the suspension of a driver’s license or certain professional licenses if eligibility criteria are met.
How Dallo Law Group Helps
Dallo Law Group employs a range of legal tools to counter the FTB’s aggressive pace in trying to collect money from you.
Immediate Levy & Garnishment Release
If a bank levy or wage garnishment is preventing you from covering essential expenses such as rent, food, or medical costs, the firm can file an emergency claim to request that the funds be released or the garnishment reduced. Collection activity may be temporarily suspended during the FTB’s review, but this suspension is not automatic and depends on the FTB’s determination. Acting quickly is critical to protect your access to necessary funds.
FTB Offer in Compromise (OIC)
For those who cannot afford to pay the full amount, our firm can negotiate an OIC. The FTB evaluates Offer in Compromise applications based on a taxpayer’s ability to pay, income, expenses, and available equity, and generally requires a lump-sum payment if an offer is accepted. Our legal team at Dallo Law Group uses detailed financial modeling to demonstrate that the state will never collect more than we offer them for our clients.
Installment Agreement (Payment Plans)
It may be necessary to enter into a formal, secure agreement to pay the debt over a specific period. This action halts further levies and garnishments as long as the client remains compliant.
Taxpayers’ Rights Advocate Assistance
If the FTB collection officers are acting unreasonably or causing undue hardship, Dallo Law Group can escalate the case to the FTB Taxpayers’ Rights Advocate to pause collection and require a manual review. The FTB has actually been incorrect in their calculations in many cases.
Penalty Abatement
Our legal team may argue for the removal of late-filing or late-payment penalties assessed by the FTB based on circumstances like serious illness, natural disasters, or reliance on incorrect professional advice.
Lien Subordination or Discharge
If our client needs to sell or refinance a home to pay the tax, the firm can negotiate a “lien subordination” or “discharge” so the transaction can move forward without the lien blocking it.
License Reinstatement
If your professional or driver’s licenses are at risk, the firm negotiates “Good Faith” agreements to have the licenses reinstated while a long-term resolution is finalized.
Dealing With The California Franchise Tax Board
It is not uncommon for a taxpayer to be uncomfortable and stressed when dealing with the Franchise Tax Board on a California tax problem. The Franchise Tax Board collectors and agents are very demanding. Although an IRS audit and an FTB audit are similar in many respects, California FTB audits are unique. For instance, the FTB has a specific procedure for selecting taxpayers for audit, especially those with delinquent tax returns. The California Franchise Tax Board (FTB) can access DMV registration and driver’s license information, as well as California property tax records, to enforce compliance with tax laws. This information helps the FTB identify potential noncompliance and take appropriate enforcement action.
FTB Audits vs. IRS Audits
The FTB often selects taxpayers for audits based on specific transactions under investigation. For example, in recent years, the FTB has frequently audited taxpayers who have executed 1031 like-kind exchanges, taxpayers who reported losses from flow-through entities such as S corporations, partnerships, and LLCs, and taxpayers who reported capital gains and losses related to various types of transactions.
Preparing for a Franchise Tax Board Audit
Organizing Your Financial Records
Maintaining accurate, organized financial records is crucial to a successful audit. Good records can help the auditor determine whether you are making or losing money, the correct total of your taxable income, and help you to substantiate the returns that you submitted. Common records include copies of payroll records (such as W-2s or 1099s), sales invoices, contracts, receipts for business expenses and other deductions, asset purchase and sale agreements, and copies of checks. Utilizing accounting software or professional assistance can ensure that your records are organized and complete.
Reviewing and Understanding Tax Laws and Regulations
Knowledge of the tax laws relevant to the audit will help you avoid inadvertent mistakes. Enhancing legal knowledge through research or seeking guidance from a Southern California tax lawyer can help to ensure that accidental errors or omissions are avoided.
Conducting a Self-Audit
Conducting a self-audit before the FTB audit is one way to ensure you are prepared. Reviewing your own returns can help you identify potential red flags or areas that need correction. Also, the self-audit can help to ensure you have collected all the documentation necessary to substantiate your returns.
Gathering Documentation
Gathering the documentation required for the audit can increase your chances of a successful audit outcome. The FTB will request specific documentation required for the audit. Make sure that you gather all of the documentation and that it reconciles with your returns. Also, avoid volunteering excessive or unrelated information as it can open the door for additional audit issues or complicate the process. Limit your disclosure to the specific information requested and present the information in a concise and organized fashion.
Appealing An Unfavorable Audit
Thankfully, a taxpayer has options when facing an unfavorable audit result. If the taxpayer disagrees with the result, the taxpayer or their designated representative can file a timely protest and begin the appeals process. The protest must include all information required by the FTB, as well as evidence and documentation that support the taxpayer’s position. If the taxpayer agrees with the audit assessment and does not file a timely protest, the result will become final.
Preparing a strong case to support the appeal is crucial in obtaining a successful result. A tax attorney can advise you on your position, help you organize and compile compelling evidence, and develop strong arguments showing why the audit decision was incorrect. Additionally, a tax attorney can help you navigate the appeals process and ensure that all mandatory deadlines are met.
Top 500 Delinquent Taxpayers – Serious Consequences
What is especially unique about the California Franchise Tax Board is that it regularly publishes the top 500 most delinquent taxpayers in California. According to California tax law, the FTB must (1) notify each taxpayer by certified mail 30 days before the FTB intends to post the information on its website; (2) as a taxpayer resolves the case with the FTB through full payment, a California payment plan, or a FTB offer in compromise, the taxpayer is removed from the list and another added.
The impact of being listed on the Top 500 list is that, in addition to pursuing normal collection activities such as file liens, issue wage garnishments and bank levies, and seize assets, the Franchise Tax Board may suspend a taxpayer’s driver’s license and his/her occupational and professional license. Furthermore, if the taxpayer conducts business with the State of California, such as a government contractor, the State agencies may discontinue doing business with the taxpayer.
Help From a Leading Southern California Tax Lawyer
At Dallo Law Group, our California tax lawyers are trained and experienced in handling your Franchise Tax Board (FTB) audit. Contact us today at (619) 795-8000 to schedule a consultation!