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Everything You Need to Know About a California State Tax Levy

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    Key Takeaways:

    •Failing to pay taxes to the California Franchise Tax Board (FTB) can lead to a tax levy, which is an unpleasant process that involves seizing assets and funds.

    • Getting help from a tax expert is often the best way to resolve a California state tax levy.

    • The FTB may be willing remove or stop levies if it’s causing financial hardship, if another person owns the property in question, if exempt funds have been taken, or for other unusual circumstances.

    • Setting up an installment agreement with the FTB may also get you released from wage garnishments and bank account levies as long as you honor your payment plan.

    • We offer assistance when dealing with FTB Levies to protect your assets and finances.

    Failing to pay taxes to the California Franchise Tax Board (FTB) can result in severe consequences, like getting hit with a tax levy. The law permits the FTB to aggressively pursue payment of due taxes through various involuntary collection actions, such as wage garnishment and asset seizure.

    A California tax levy is a process the FTB uses to collect tax debts owed. It may seize your assets to recoup tax you owe, along with related fees or interest. The agency can also seize funds in your bank account. These actions are unpleasant as they cause significant financial and personal stress.

    Getting help from a tax expert is often the best way to resolve a California state tax levy, but either way, you’ll want to understand the process and your rights as much as possible. This guide explains California tax levies and discusses how to deal with FTB levies to protect your assets.

    Overview of a California FTB Levy

    California Tax Levy

    The FTB is responsible for managing California’s tax programs. Some of these tax programs include:

    Failing to pay these taxes over time may cause the FTB to issue you a California tax levy. This is typically a last step, which would happen after you receive a final notice for paying the tax you owe and you haven’t contacted or made arrangements with the FTB.

    You may be able to adjust your deadline to pay if you receive a notice by calling the agency. Doing nothing will likely result in a levy on your bank account, personal property, or other assets. The best way to protect yourself is to resolve your balance.

    How to Stop a California Tax Levy

    A levy only stops after you’ve resolved your case or a resolution is pending. The best option is to pay the tax you owe in full and on time. Another option is to set up a monthly payment plan with the agency to resolve your debts.

    The tax code also requires you to request an installment agreement by filling out an Offer In Compromise form. This process can help settle part of your debt and can prevent some interest and late fees. 

    You may also choose to apply for hardship status to have your debt collections stopped for 6-12 months. Another option is to file bankruptcy to stop the FTB from taking further collection action, but be aware that bankruptcy is a serious decision that may have ripple effects on your finances.

    How to Get a California State Tax Levy Release (6 Ways)

    Getting a California FTB levy released can be challenging, but it’s often an effective way to prevent the seizure of your funds and assets. The FTB often issues an “order to withhold” in which it seizes funds from your bank account, for example. The bank will freeze those funds for 10 days before transferring them to the FTB.

    Contacting an FTB agent quickly may help you get an extension on the funds’ transfer and possibly even get the levy released. Below are the main ways to have the FTB release or stop a tax levy:

    Note that levy release is a complex process and it’s not guaranteed. Removing a California tax levy after the agency issues it can take time and effort. Below is more detail on some of the common circumstances that may lead to stopping a levy. 

    Financial Hardship

    The FTB may be willing to remove a levy if it’s causing you financial strain. You’ll need to call and tell them the tax levy is the cause of your financial trouble. They will ask you to provide detailed financial information to validate your claim, such as providing an eviction notice or other documentation.

    Being elderly may also help prove financial hardship, though it’s not guaranteed. It’s important to note that you’ll only receive hardship status if you prove to the FTB’s satisfaction that you struggle to meet your daily needs. Also be aware that you may qualify for up to a 12-month hardship in the event you are approved for your hardship. 

    Levy on Another Person’s Property

    The FTB may issue a levy for any property, money, or asset you have, as mentioned above. This can get sticky when the property now belongs to someone else. In this case, you may request a levy release by proving someone else owns the property. 

    Let’s say you previously sold a car to another person but didn’t transfer its title. The individual has been maintaining and using the vehicle for years, but now the FTB has issued a levy against the car because it’s still registered in your name.

    The best option in this case is to call the FTB to resolve the situation and get a release (and make sure the title is properly transferred).

    Here is another example. Say you’re the financial warden for your disabled adult child. A bank account is in your name, but your child owns the funds.

    Call the FTB if they issue a levy and prove the funds in that bank account aren’t yours. Be ready with documentation to make the process smoother.

    Release for Exempt Funds

    Imagine your employer miscalculates the amount of money to withhold from your salary, and it sends an excess to the FTB. These are likely exempted funds, so provide evidence, and you’ll get those funds back after contacting the FTB.

    Veteran benefits and Social Security income are exempt from California state tax levies. You may be able to get a levy release by contacting the FTB and proving the levy seized exempt funds.

    Explain to the FTB that this is your only source of income to prove they took exempt funds from your account. It’s often the easiest type of a California FTB levy release to get; just be sure you have the paperwork to make proving your case easier.

    Payment Plan Options

    Setting up a payment plan for your tax debts is a great way to get a California state tax levy released. You may be able to create an installment agreement with the FTB, and they’ll remove wage garnishments  and bank account levies as long as you honor the payment plan. Note that the agency will still issue you a levy if you fail to meet your agreement.

    The agency will return seized assets to you only after setting up a payment plan. Stay as proactive as possible when handling FTB levies and take action early enough before the levy occurs, if possible.

    An FTB Levy Issued by Mistake

    The FTB may issue a levy by accident, as mistakes can happen. Contact the agency if this happens to you to start the process of having the California tax levy on your property or funds released.

    The agency will compensate you for charges incurred if it’s responsible for the error. The FTB may even reimburse you if the levy resulted in you being charged for insufficient funds in your bank account.

    Aim to send a note to the agency within three months of the tax levy after the issuance date to receive compensation for charges. State that the costs you incurred were due to their error and that you need to be reimbursed.

    Ensure you provide any information the FTB requests, and they’ll typically reply to your request in 30 days.

    Other Unusual Situations

    There are other unique scenarios in which the agency may be willing to remove a levy. Life happens, and if you’ve had an unusual hardship or other situation, it’s worth contacting the agency to see if they can work with you. Such circumstances may include:

    Work with a California tax attorney if you think the FTB should release the levy for unusual circumstances. They’ll discuss the matter with you and let you know if the agency is likely to take away the levy. The tax expert will gather evidence to support your claim and negotiate with the agency on your behalf.

    Finding out there is a levy against your assets is stressful, and the situation can be complex to navigate. Always try to communicate with the FTB promptly and provide proper documentation to support your claim. 

    Other Things to Know About a California State Tax Levy

    Handling FTB levies is complex, stressful, and daunting. You don’t have to go through the process alone, however, as tax experts can help. You’ll still want to get informed on some of the basics of the process so you’ll know what to expect. Below are a few key things you should know about handling a levy.

    How Much Can the FTB Can Seize From Your Account?

    The FTB can seize funds in your bank account equal to the amount of tax you owe.

    Imagine your account has $6,500 and you owe the FTB $5,000. The agency can take $5,000 to repay your debts and leave $1,500 in your account. They’ll only seize all the funds if your tax debt exceeds $6,500.

    What is The Levy Duration for Back Taxes?

    A bank levy for tax owed in California usually occurs within 10 days.

    Your bank typically freezes funds and transfers the amount owed to the agency. Acting quickly when you receive notice of a levy can help you get informed and in control of the situation faster. 

    How Much Can the FTB Asset Levy be for Unpaid Taxes?

    The FTB can seize 100% of your assets to settle your outstanding income taxes.

    Let’s say your tax dues are $6,000, and your assets are worth $50,000. The agency will take $6,000 worth of assets. Expect the agency to seize all of your assets if the amount you owe is more than $50,000, in this example.

    How Much Can the FTB Can Levy From Your Wages?

    People with a net weekly pay of $217.50 or below are exempt from having their wages garnished. The agency takes the amount you make above $217.50 if your weekly wage ranges from $217.50 to $290. It garnishes 25% of your pay if your wage exceeds $290.01. Note that these numbers represent take-home pay (after-tax wages).

    Get Expert Help With a California State Tax Levy

    Dealing with a California tax levy is difficult, so it’s best to avoid or stop it before it happens. You may be able to show you don’t actually have an outstanding tax bill, apply for hardship, establish a payment plan, or file an Offer in Compromise form if you can’t pay your debts in full.

    The FTB has specific procedures and steps to follow, and the last thing you want is to have a levy disrupt your finances. That’s why getting help from experienced tax attorneys who understand the FTB is ideal.

    At Silver Tax Group, we have a team of qualified tax attorneys with vast expertise in handling FTB levies. Our specialists will guide you through the process to help protect your assets, property, and wages. Contact us today to speak with a tax expert and learn how we help you resolve a California tax levy.

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