Tax Relief Services California

BOE Tax Liens

If you are delinquent in paying your taxes, the Board of Equalization has the legal right to place a lien against any California real estate you own or personal property of value to secure the debt. In order to avoid this, you may want to consult with a reputable tax professional or CPA for their tax help and advice.

The lien would act as an encumbrance on the property, which would keep you from selling, refinancing or transferring ownership. Furthermore, the lien would be recorded so it would be public record and available to credit bureaus and thus would likely affect your credit rating. Once the Board of Equalization places a lien against you, they are legally entitled to enforce the collection of your tax debt by way of levying your bank account(s) and seizing your assets.

Help with BOE Bank Levies

When you receive a Notice of Levy from the Board of Equalization, it’s imperative that you get tax help right away since the bank will hold the funds in trust before they are required to send it to the Board of Equalization. This gives you time to consult with a tax professional or CPA who can help you dispute the levy. With the right tactics you may be able to get your bank levy lifted and prevent your money from being transferred to the Board and instead, returned to your bank account.

Stopping the bank levy and having your money returned is only the initial step in resolving this matter. Next, you want to prevent the Board of Equalization from ever placing a levy on your bank account(s) again. To accomplish this you will likely need tax help from a qualified professional or CPA with experience working with the Board of Equalization on such matters. What you need is a permanent solution, which can be achieved by having your tax professional do the following:

Go through your books to make sure that the amount the Board of Equalization is claiming you owe is accurate. Very often they claim that taxpayers owe more than they actually do.

Recalculate the interest and penalty charges you are being assessed. These added charges are often why tax bills are much higher than you would expect.

Negotiate with the Board until a formal arrangement is agreed to that will resolve your outstanding taxes once and for all. If the Board of Equalization has contacted you about an outstanding tax liability, you would be wise to consult with a reputable tax professional or CPA and accept the tax help and advice offered. The Board has the right to levy, lien, seize the funds in your bank account and garnish your wages in order to satisfy your tax debt. With the help of your tax professional you can avoid all that.

BOE Power of Attorney

You are entitled to designate a qualified tax professional to represent you with regard to tax matters before the State. You would need to complete and sign a Power of Attorney Form BOE-392 and submit it before any issues could be discussed with him/her. Make sure you choose a reputable representative who has experience providing the kind of tax help you need.

Terminating an Installment Payment Agreement with the BOE

The BOE has the right to terminate an Installment Payment Agreements if the payments are arriving late, the taxpayer is making partial payments or they are generally delinquent. The agreement may also be terminated if the taxpayer does not disclose income or financial assets on his/her financial statement. Other causes for termination could be failing to raise payment levels when requested due to higher income or new assets, or failing to cooperate in a review of his/her finances.

Necessary Expenses

These expenses must provide for the taxpayer’s and his/her family’s health, welfare and/or ability to earn an income. In other words they must meet what’s called the “necessary expense test.”

In certain situations, representatives of the Board of Equalization will use his/her judgment when deciding if an expense is necessary or not. All allowed expenses must be reasonable in terms of amount and the total amount for necessary expenses is the minimum amount the delinquent taxpayer (and family) actually needs to exist.

Conditional Expenses

Expenses that are considered unnecessary are called “conditional expenses.” However, they may be allowed if the taxpayer can pay his/her tax debt in full, including penalties and interest, within three years.

Rules Governing Expenses

Ninety-Day Rule

Making payments on unsecured liabilities are not permitted of omitting these payments would allow the taxpayer to fully pay their tax debt within 90 days. However, minimum credit card payments are allowed in order to protect the taxpayer’s credit rating.

One-Year Rule

Gives a time limit of up to one year for the taxpayer to modify or get rid of extreme necessary or non-allowable conditional expenses if the tax debt, along with accrued interest and penalties, cannot be paid off in full within three years. This time limit may be adjusted from one month to one year, based on the particular expense.

Three-Year Rule

Gives a time limit for allowing conditional and extreme necessary expenses and states that the entire tax debt, including accrued interest and penalties, must be paid in full within three years.

Disposable Income Rule

This is how much money remains after deducting the allowable expenses from gross income. These deductions include those required by law to be withheld from the taxpayer’s paycheck, or any court ordered or enforceable agreement for alimony or child support payments. Money that is required to be withheld per the tax code include, but are not limited to, wage garnishments, federal and state taxes, and contributions to FICA and Medicare. The balance is disposable income, which is available to pay down the tax debt.

The tax liability at hand must be final and not a matter of dispute.

This tax account has to be closed once and for all and the taxpayer cannot operate the same business or even the same type of business that originally accrued the tax or fee debt that the proposed offer seeks to settle in the Offer in Compromise.

The taxpayer has no way of paying his/her tax debt in full within five to seven years, which would be considered a reasonable period of time.

Delinquent Penalty

When someone files their tax return late they will be charged a delinquent penalty of 5% of the unpaid tax for every month the return is still late. The maximum penalty for filing late is 25% of the outstanding tax. The minimum delinquent penalty is $100 or 100% of the unpaid tax amount (whichever is less).

Franchise Tax Board (FTB) – Another California Taxing Authority

The Franchise Tax Board is responsible for administering a number of different programs for the State of California, as follows:

• Corporation taxes
• Personal income taxes

The Franchise Tax Board is also responsible for the administration of certain programs that have nothing to do with taxes, such as:

• The Homeowner & Renter Assistance Program (HRA)
• Debt collection for the Department of Motor Vehicles concerning delinquent vehicle registrations
• The collection of delinquent child support payments

For the most part, the tax laws of California have conformed to those of the Internal Revenue Service since January 1, 2005, although there are some differences that may mean taxpayers must adjust the figures taken from their federal tax returns. Certain areas do not conform and these are specified in the instructions on the relevant tax forms.

A major part of the Franchise Tax Board’s responsibilities is the collection of taxes and this does involves going after individual taxpayers and businesses to collect an outstanding tax debt. When necessary the FTB has must aggressive measures in order to collect unpaid taxes:

• FTB Penalties & Interest
• Underpayment Penalty

When a taxpayer does not pay his/her taxes in full when due, he/she will be charged with an underpayment penalty. This penalty is 5% of the unpaid portion as of the date it was due, plus 0.5% each month or portion of a month the tax continues to be unpaid, not to extend beyond 40 months with the maximum penalty being 25% of the amount of total outstanding tax.

Interest

When taxes are not paid in full on time the Franchise Tax Board will charge interest on the outstanding balance. If the interest ends up being cancelled, it’s a form of tax relief referred to as “abatement.” However, interest can only be abated if the tax code allows for the exception.

Taxpayers are charged interest on any delinquent or late tax payment from when the return was originally due to the date the payment was received. Furthermore, if the taxpayer does not pay the other penalties being charged within 15 days of the date on their Notice, the taxpayer will be charged interest from the Notice date until the tax bill is paid. Interest will be compounded daily and twice a year the rate of interest is adjusted.

FTB Notification of Collection Activities

Before the Franchise Tax Board commences collection activities like levying a delinquent taxpayer’s bank account(s) and placing tax liens, it will notify the taxpayer by mail of the pending action. The Notice will explain the tax debt, the taxpayer’s right to dispute the debt, the consequences if they don’t comply and the deadline for resolving the matter to avoid collection activities.

If you’ve changed addresses and have not contacted the Board with your new mailing address, your Collection Notice will obviously be sent to your last known address. However, this still fulfills the legal requirements for due process even if the Notice was not forwarded on to you. You must update your address with the Franchise Tax Board even if you did update it with the U.S. Postal Service.

Personal Liability for FTB Business Taxes

Business owners and corporate officers may be held personally liable for the business’ unpaid taxes. When an owner or the officers receive excessive compensation, bonuses and/or other assets from the business that prevents it from having the money to pay its taxes, the owner or officers may be held personally and financially responsible for paying the tax debt. Every business should have a tax professional who monitors the finances, offering tax help and advice on a regular basis so that these situations do not occur.

Help for FTB Bank Levies

When you receive a Notice of Levy from the Franchise Tax Board, it’s imperative that you get tax help right away since the bank will hold the funds in trust before they are required to send it to the Franchise Tax Board. This gives you time to consult with a tax professional or CPA who can help you dispute the levy. With the right tactics you may be able to get your bank levy lifted and prevent your money from being transferred to the FTB and instead, returned to your bank account.

Stopping the bank levy and having your money returned is only the initial step in resolving this matter. Next, you want to prevent the Franchise Tax Board from ever placing a levy on your bank account(s). To accomplish this you will likely need tax help from a qualified professional or CPA with experience working with the Franchise Tax Board on such matters. What you need is a permanent solution, which can be achieved by having your tax professional do the following:

• Go through your books to make sure that the amount the Franchise Tax Board is claiming you owe is accurate. Very often they claim that taxpayers owe more than they actually do.
• Recalculate the interest and penalty charges you are being assessed. These added charges are often why tax bills are much higher than you would expect.
• Negotiate with the FTB until a formal arrangement is agreed to that will resolve your outstanding taxes once and for all.

FTB Power of Attorney

A Power of Attorney is an executed legal document allowing someone you designate to represent you in the matters specified in the document. If you would like a qualified individual you trust to provide tax help on your behalf before the Franchise Tax Board you would need to complete, sign and submit Power of Attorney Form FTB-392 to the agency.

Installment Payment Plans

If you do not have the funds to pay your State taxes in full, you have the option of paying off your tax liability over time by entering into an Installment Payment Plan with the Franchise Tax Board. However, interest and penalties will be charged on the unpaid portion until your taxes are paid in full.

The following documents will need to be submitted with your Offer in Compromise application:

• Offer in Compromise for Individuals Form FTB 4905PIT
• Documents verifying your income and expenses as well as any other documents asked for on the form

If you are designating someone else to represent you before the Franchise Tax Board, you must complete and submit Power of Attorney Form FTB 3520.

Most applicants are notified within 90 days of the FTB’s decision. If your offer is accepted, you may be asked to sign a separate collateral agreement that states that you will pay a certain percentage of your income over the agreed upon threshold. This collateral agreement is usually in effect for 5 years. Note: You should only submit funds when requested by the FTB and only via a cashier’s check or money order.

If you have any further questions or concerns, please call the Offer in Compromise office at (916) 845-4787.

Three ways you can apply for an Installment Agreement with the FTB:

Phone (800) 689-4776 during regular business hours and utilize the Interactive Voice Response system.

Complete Installment Agreement Request Form FTB 3567, sign on page 3 and mail it to the California Franchise Tax Board, P.O. Box 2952, Sacramento, CA 95812-2952.

You can also do this online on the Franchise Tax Board’s website if you meet the following qualifications:

• You owe a balance of $10,000 or less
• You agree to pay the full balance within 36 months
• All your personal tax returns have been filed
• You agree to make your payments via electronic fund transfers
• Your monthly installment payments will be at least $25
• All future income tax returns will be filed on time
• You agree to pay all future taxes on time

Once the FTB receives your application they will reach out to you for certification that you are undergoing financial hardship.

If you apply over the phone or send your application through the mail, you can expect to be notified within 30 days that the FTB has received your application. If you don’t hear back, phone (800) 689-4776. You can also use this same phone number if you have questions you would like answers to.

Furthermore, the State needs to protect its interest so you may have a lien filed against you, which will remain until you have paid off your tax debt in full.

If the Franchise Tax Board rejects your application, you may request that your application be reviewed, but you must do this within 30 days of the date of your denial letter.

Your request for a review should be sent to:

Franchise Tax Board

P.O. Box 2952

Sacramento, CA 95812-2952

Office of Taxpayers’ Rights Advocate

If you have tax problems that you haven’t been able to resolve, there is a Taxpayers’ Rights Advocate’s Office that offers tax help by independently reviewing each situation. This is also where you would turn for answers to general tax questions and for information on California’s tax system.