How the FTB collects
The Franchise Tax Board handles California personal income tax and corporate franchise and income tax. (Sales and use tax is handled by a separate agency, the California Department of Tax and Fee Administration, and payroll taxes by the Employment Development Department.) When an FTB balance goes unpaid, collection typically escalates through notices to a Final Notice Before Levy and a Notice of State Tax Lien. You generally have 30 days from those notices to request a review.
After that, FTB's tools include:
- Wage garnishment through an Earnings Withholding Order for Taxes, sent to your employer. It continues every pay period until the balance on the order is paid or FTB releases it.
- Bank levies through an Order to Withhold, which can take funds from bank accounts and other assets held by third parties.
- State tax liens, recorded against real and personal property. FTB records a release within 40 days after the liability is paid.
- Refund intercepts, including other state payments owed to you.
- License consequences for the largest debts. California publishes a list of its top delinquent taxpayers, and those listed can face suspension of state-issued professional and driver's licenses.
The 20-year problem
The IRS generally has 10 years to collect a tax. FTB has 20 years, and the period can be suspended during bankruptcy, while you're on a payment plan, and in other situations. New fees can also become the "latest liability" for a year and effectively restart the clock. In practice, an FTB balance doesn't fade away the way some old IRS balances do. Ignoring it is rarely a strategy.
IRS changes lead to FTB bills. California generally conforms to federal adjustments. If the IRS changes your return after an audit or a CP2000, FTB typically assesses its share later, often a year or more after the IRS. If you're resolving an IRS adjustment, plan for the California bill too.
FTB payment plans
California offers installment agreements, with tighter limits than the IRS:
- Individuals can apply online if they owe $25,000 or less and can pay within 60 months. All income tax returns for the past five years must be filed. A $34 setup fee is added to the balance.
- Businesses can apply if they owe $25,000 or less and can pay within 12 months, with a $50 setup fee.
- If you already have a wage garnishment or bank levy in place, you generally can't apply online and must call FTB.
- A tax lien may be a condition of the agreement.
Balances above those limits need a financial review, and FTB has more discretion. That's where preparation matters: a complete, accurate financial statement and a realistic proposal. If FTB rejects an installment request, it generally can't levy for 30 days after the rejection, or during a review you request within those 30 days.
Owe FTB more than you can pay? We'll find the plan that fits, with the IRS too.
Get a Free ReviewFTB offer in compromise
California has its own offer in compromise program for taxpayers who can't pay their balance in full. Like the IRS program, it's based on what FTB could realistically collect from your income and assets. FTB's review is separate from the IRS's, with its own forms and standards, so an accepted IRS offer doesn't mean FTB will accept a similar one, or the other way around. We evaluate both before recommending either.
Stopping an FTB wage garnishment or bank levy
An FTB garnishment or levy can often be resolved by:
- Setting up an installment agreement that FTB accepts in place of the garnishment
- Showing financial hardship, with documentation of income and necessary expenses
- Correcting the balance, for example by filing a missing return to replace an FTB estimated assessment, which often overstates what you owe
- Paying the balance, when that's the most practical option
For an Order to Withhold on a bank account, act quickly. Once funds are remitted to FTB, getting them back is much harder.
California businesses and responsible persons
For businesses, California balances often span several agencies: FTB for franchise and income tax, CDTFA for sales and use tax, and EDD for payroll withholding and unemployment insurance. Owners and officers can be held personally liable for unpaid trust-type taxes, such as sales tax collected and payroll tax withheld. If you also owe federal payroll taxes, see payroll tax debt.
Moved out of California?
If you've left California, FTB can still collect. Notices follow you to your new address, collection continues, and California balances can be offset against refunds. Moving doesn't end the 20-year clock, so it's usually better to set up a plan from wherever you live now.