The California Franchise Tax Board (FTB) manages and collects the state’s income tax and corporate franchise and income tax. It falls under the purview of the California Government Operations Agency.
The California State Controller, the California Department of Finance Director, and the California Board of Equalization Chair make up the board. The chief administrative officer is the executive officer of the Franchise Tax Board.
Reasons that Taxpayers Owe Money to the California Franchise Tax Board
The California Franchise Tax Board is in charge of collecting personal and corporate income taxes in California. California taxpayers must pay their taxes to the FTB. However, many taxpayers still owe the FTB money even after filing their taxes. There could be several reasons a taxpayer owes money to the FTB after filing taxes, depending on your circumstances.
These reasons can be:
- Late Tax Return Penalty
One of the most common reasons that many taxpayers owe money to the FTB is failure to file a tax return on time. In particular, a taxpayer may incur late fees on an unfiled return the day after failing to file their tax return. In California, taxpayers face a more than 5% penalty for each month their returns are not filed.
- Failure to Pay the Entire Tax Bill
It is very usual for a taxpayer to need help paying their entire tax bill. When this occurs, taxpayers may attempt to pay as much of their bill as possible. But even so, unless you have a payment plan in place with the FTB to manage your tax bill, you will almost certainly face tax penalties in addition to your tax debt.
This can make reducing your tax bill extremely difficult.
- Child Support Unpaid
It is reasonable for taxpayers to believe that they only owe the FTB taxes for issues arising from their tax returns. However, there are numerous other reasons why a taxpayer might owe the FTB money.
The FTB may also issue a bill to a parent who still needs to make monthly child support payments. For example, if you do not pay child support, the FTB may set off your wages until the past-due balance is recovered. In extreme cases, the FTB may even place a tax lien on a taxpayer’s property, allowing the property to be taken hold of if child support is not paid.
- Tax Return Inaccuracies
Taxpayers must ensure the accuracy of their information when preparing their tax returns with the FTB. For example, if taxpayers file for the incorrect tax credit or calculate the wrong amount of taxes, they may receive a tax bill.
When the FTB finds an error on a taxpayer’s return, they will most likely adjust the return and send the taxpayer a bill for the remaining taxes. Sadly, if you filed close to the deadline, you may have to pay an additional late fee on top of the amount you already owe the FTB. The FTB may sometimes initiate a tax audit due to serious filing errors.
- Business Tax Creditor
In some situations, the owner or an officer of a firm may be held liable for the company’s debts. For example, if the business does not have the funds to pay its taxes, the bill may fall on the owners of the business.
Avoiding Franchise Tax Board Enforcement Action in California
When taxpayers fail to pay their state income tax, the Franchise Tax Board has the authority under the California Revenue and Taxation Code (R&TC) to take involuntary collection actions. You can avoid involuntary collection actions if you do the following:
- Pay your entire tax liability.
- Make an instalment agreement.
- File required tax returns, pay any outstanding balances, or provide proof that you are exempt from filing.
- Make a Compromise Offer that they accept.
- Establish that you cannot pay your liability due to a financial hardship, also known as Currently-Not-Collectible.
Order to Refrain
An FTB Order to Withhold is a legal document to collect a tax debt. It is also known as a Bank Levy or a Bank Garnishment. If the FTB imposes a bank levy on you, you should seek assistance as soon as possible. This is because levied funds have a holding period during which you can seek professional assistance and contest the levy.
Not only can we halt the transfer of funds, but we can also take steps to prevent such an event from happening again.
- Notifications of Collection Action
Any actions the FTB intends to take against you will be communicated to you. It is also known as a Bank Levy or a Bank Garnishment. If the FTB imposes a bank levy on you, you should seek assistance as soon as possible.
This is because levied funds have a holding period during which you can seek professional assistance and contest the levy. Not only can we halt the transfer of funds, but we can also take steps to prevent such an event from happening again.
- Return Substitute
If you do not file your tax returns, the FTB, like the IRS, may file a Substitute for the return. This is far from ideal because they will overestimate your income. This results in a significantly higher tax bill without normal returns.
While you can still file an amended return if you do so on time, failing to do so will legally bind you to pay a significantly inflated bill.
- Seizure Refund
If you owe taxes to the California Board of Equalization, the FTB may work with them to intercept any refunds due to you and apply them directly to your liability.
The Bottom Line
If you require accounting assistance to find out why you have incurred money to the California Franchise Tax Board, you must contact an experienced IRS Problems representative as soon as possible. It cannot be very pleasant to learn that you owe the FTB money, and our team of accountants is here to help you figure out what to do next.
- Franchise Tax Board