Getting a notice of an FTB Levy comes as a complete shock, and it’s usually a very unpleasant one. If you owe taxes or interest, the California Franchise Tax Board can levy your bank account or wages to cover the debt. The FTB is a large state program that administers many different debt collection programs, most notably tax debt collection. If you fail to pay your taxes or file them incorrectly, you may incur these highly unwelcome problems with the FTB. However, if you receive notice that you are going to be levied, don’t panic right away. There are steps that you can take to solve the problem.
Before you are levied by the FTB, you will first receive an initial notice in the mail warning you of the levy and explaining why it is happening. Many people do not understand what this notice is, which is why they then end up having their money taken from them as a tax levy. Many people also never even receive these notices because they have moved and not updated their address. It is very important to update your mailing address with the FTB right when you move (even if you have the US Postal Service’s forwarding service), just to ensure that the document makes it to you.
If you fail to address the levy on time, you will then receive your official notice of levy. Warrants of money or assets will be collected by a marshal, sheriff, constable, or the California Highway Patrol. You will then be required to turn over the money to them immediately for delivery to the FTB. If the FTB is levying an asset other than money, it will then be put up for public auction. If the FTB chooses to levy your wages, it will go directly to them through your bank account. This is called garnishment.
The best way to deal with a levy is to take steps to prevent it from ever happening. This can be done by staying on top of your taxes. You should make sure that you always file everything by the deadline, even if you can’t pay, and ensure that everything on your tax return has been completely verified to avoid error. It may help to hire a tax professional to double check everything if you are feeling unsure or you have a very complex tax return to deal with. If you can’t pay right away, don’t worry. Just file your taxes as normal and pay as much as you can, and then the IRS will send you a bill shortly thereafter. If you can’t pay the bill on time, you should then contact the IRS and request and installment agreement to help you pay off your debt legally over time. This can usually be done online. Although both of these options are more costly than paying your taxes on time, they are still preferable to receiving a levy.
If you do receive a levy, you should contact a tax professional immediately. If you wait, you run the risk of your bank placing your assets in a trust where you cannot access them, which will make it nearly impossible to get them back. The first thing you and your tax professional should do is assess your financial situation as well as the levy notice to ensure that everything is correct. Often, people receive levies because the IRS or FTB calculated their tax or interest incorrectly, and therefore erroneously claim you owe a much higher amount than you actually do. You may also not have been aware of the interest on your taxes and did not pay them, which is another common reason why people receive levies unexpectedly.
Although you can contest your levy, it is best to have a professional negotiate with the FTB for you to ensure that you save the most money and do not get into legal trouble. A good professional with working knowledge of tax code should be able to negotiate a payment plan for you or even get you out of the levy completely. This is extremely important if the FTB is seizing an asset like your home or your car instead of your money.
If the FTB is levying you on interest charges, there are a few ways that you can get out of it. However, the FTB and IRS are very strict with abatements, which is why this should be handled by a professional. You can get an abatement for a financial hardship, a distaster, an error or delay by the FTB or IRS, or for receiving an erroneous refund. These abatements are quite difficult to get, but if you are legitimately in one of these situations, you will be eligible for one.
If your levy is on tax debt instead of interest, you may want to consider filing an offer in compromise. This should always be done with professional help, as it is a very complicated and difficult process. This document will potentially allow you to work with the FTB and IRS to settle your debt for less than you actually owe.
Although getting levied by the FTB can be scary, don’t panic. Often, levies happen because of an error and can be corrected with professional help. Contact a knowledgeable tax professional immediately if you have received a levy, and then can help you proceed accordingly.
