The maximum amount of money the California Franchise Tax Board (FTB) can garnish is 25% of an employee’s net income after all the legally required deductions. These legally required deductions include social security taxes, worker’s compensation, retirement plan contributions, and health insurance benefits. For example, if your net monthly income is $4,000 a month, the California FTB can garnish up to $1,000.
The California FTB can issue an Earnings Withholding Order for Tax, or wage garnishment, if you fail to pay taxes or owe back taxes. The following will include the information you need about the California FTB, how the wage garnishment process works, and how to stop or reduce wage garnishments.
The California FTB: What is it?
The California FTB collects state personal income and business entity taxes. The revenue from tax payments goes into the state’s general fund to pay for various public services, such as schools, law enforcement, publicly funded health care, and roads.
The California FTB will aggressively pursue any taxpayer who fails to pay their taxes or owes back taxes. Its collection efforts include wage garnishments, liens, and property seizures. This agency has a lot of power to collect taxes, and the penalties for unpaid taxes are severe. In addition to its collection powers, the California FTB can investigate state income tax fraud, tax evasion, asset concealment, and other criminal tax-related criminal activity.
There are several California FTB offices throughout the state. Its main office is in the state capitol of Sacramento, and other office locations include Oakland, Los Angeles, San Diego, and Santa Ana.
What is a wage garnishment?
A wage garnishment, or withholding order, is a court-ordered tax debt collection strategy that enables the California FTB to deduct funds from your paycheck to settle your tax obligation. There is a limit to how much the California FTB can deduct from your paycheck, and your financial condition will also determine how much the state can deduct.
There are several types of wage garnishments. These include the following:
• Earnings withholding order for taxes (EWOT)
• Earnings withholding order (EWO)
• Order to withhold (OTW)
• Continuous order to withhold (COTW)
There are other ways the California FTB can collect unpaid taxes and deduct funds from your paycheck through your employer. Other payers can include the following:
• Financial Institutions, including banks
• Escrow companies
• Rental payments to a landlord
Maximum Wage Garnishment Amount in California
There are two ways the California FTB will determine the wage garnishment amount, and the FTB will garnish the lesser of the two amounts. According to California law, the maximum wage garnishment cannot exceed 25% of your weekly disposable income.
Second, the maximum wage garnishment can also be 50% of your disposable income, over 40 times the state minimum wage. For example, suppose your disposable income exceeds the minimum wage times 40. In that case, the California FTB can garnish the overage amount by 50%.
Federal Wage Garnishment Law Limits
Federal wage garnishment law is like the law in California. There are two federal wage garnishment amounts, and the federal government will garnish the lesser amount. Title III of the Consumer Credit Protection Act limits the federal government to garnish no more than 25% of your disposable income.
The difference in the federal wage garnishment law from California is in the amount you earn above the federal minimum wage. According to the CCPA, the federal government can garnish any amount 30 times the federal minimum wage. For example, the federal government can garnish any amount above the federal minimum wage times 30.
California Wage Garnishment Law Limits
The California FTB cannot garnish 100% of your income. The agency also cannot intimidate, harass, or use unfair tactics to collect unpaid taxes.
How to Calculate Disposable Earnings
Disposable income is the gross income minus federal and state taxes. For example, your disposable income is $800 if your gross income is $1,000 and the combined state and federal taxes is $200. Disposable income does not include the amount after retirement savings, health insurance, and other deductions.
Limitations to Federal Government Employee Wage Garnishment
Federal government employees are subject to the same California wage garnishment laws as non-federal government employees. State wage garnishment laws take precedence over federal wage garnishment laws.
Maximum Garnishment Amount in California
The California FTB can garnish the lesser amount of 25% of your disposable income or 50% of your disposable income, which is 40% times above the minimum wage.
Maximum Garnishment Calculation
The minimum wage in California is $15.50. If you work 40 hours a week, your income will be $620. However, your disposable income will be less than $620 weekly after deductions for state and federal taxes. The California FTB can only garnish 25% of your wages if your disposable income is more than $620 weekly. For example, $650 weekly disposable income x .25 = $156.25 weekly garnishment.
The California FTB can garnish 50% of your wages of any disposable income 40 times above the minimum wage. For example, 40 times $15.50 equals $620 a week. If your weekly disposable income is $650, then $650 – $620 = $30 x .50 equals $15 weekly garnishment. $15 is less than $156.25, so the California FTB will garnish $15 weekly from your wages.
Exemption for Social Security Benefits
The California FTB cannot garnish Social Security payments or funds in a bank account if those funds only come from Social Security. In addition, the California FTB cannot stop Social Security from sending you payments and direct those payments to them to pay off a tax debt.
When are tax liabilities eligible for garnishment?
Tax liabilities in California are eligible for garnishment up to 20 years from the due date of the last tax liability.
Tax Debt Garnishment Process and the Involvement of Financial Institutions
When you receive a demand notice from the California FTB to pay back taxes, you will have 15 days to pay the amount in full. The California FTB will start the collection process if you do not make a full payment or contact the agency to make a payment arrangement within 15 days. There are several ways the California FTB can collect back taxes. These include the following:
• Wage garnishment
• File a lien
• Levy a bank account
• Intercept funds from the state or federal government
Considerations for Taxpayers with an Outstanding Tax Debt Balance in California
There are many resources, advice, and self-help information that you can access if you have an outstanding balance with the California FTB. The Department of Consumer Affairs, legal aid clinics, and self-aid help through the court system can help you with any wage garnishment issues.
Available Payment Plans and Installment Agreements
The California FTB offers payment plans and installment agreements for individuals and businesses needing help fully paying their tax bills. A personal payment plan takes 90 days to process, costs $34 to set up, and must pay off the tax bill in three to five years. A business payment plan takes 60 days to process, costs $50 to process the application, and must pay off the tax bill in 12 months.
California FTB Financial Hardship Programs
The California FTB offers several financial hardship programs to help you if you cannot pay your tax debt. These programs include the following:
• A monthly installment agreement
• A settlement program to pay less than the full amount in one lump sum
• Delay FTB collection activities with a financial hardship status
• Seek taxpayer advocacy services through the FTB
These programs have eligibility requirements to qualify, and you must show proof of financial hardship.
Frequently Asked Questions
What is the maximum garnishment in California?
The current maximum garnishment in California is the lesser of 25% of your disposable income or 50% of your income, which is 40 times above the state minimum wage. The state cannot garnish wages if your income is below minimum wage.
What is the new garnishment law in California?
The new garnishment law is SB 1477 and begins on September 1, 2023. This law changes the calculation for garnishing wages. According to this new law, the maximum amount the state can garnish wages is the lesser of 20% of disposable income or 40% of the disposable income, which is 48 times greater than the state or municipal minimum wage.
How do I stop wage garnishment in California?
There are three ways you can stop wage garnishments in California:
• You can negotiate a settlement to either pay a one-time settlement for a lower amount or have lower monthly payments.
• You can file for bankruptcy to stop the action of the California FTB.
• You can file a financial hardship with the court to prevent the garnishment or settle for a lower amount.
What is the most they can garnish from your paycheck?
The California FTB has two choices in the amount they can garnish from your wages. They can garnish 25% of your disposable minimum wage income or 50% of your disposable income, which is 40 times above minimum wage. They will always go with the smaller amount. The California FTB will not garnish your wages if you make less than minimum wage.
Can California garnish wages in another state?
California can garnish your wages if you move to another state, and the state has up to 20 years to collect back taxes. The California FTB can be more aggressive than other states when garnishing wages your wages when you move out of the state, especially if you also owe federal back taxes. However, the California FTB may treat your case as a secondary or non-priority after you move out of state.
What happens if you do not pay the California franchise tax?
You will incur fees and a 10% penalty if you do not pay the California franchise tax. The California FTB can also put a tax lien on your home if you are a homeowner.
Does the state of California forgive tax debt?
California can forgive tax debt, but it is rare and hard to get. The FTB Offer in Compromise is an agreement that enables you to settle a tax debt for less than what you owe. The California FTB, state taxing authorities, and you must agree to the settlement.
How long can California collect back taxes?
California can collect back taxes for up to 20 years after the date of the last past-due notice.
Can you have two wage garnishments at once in California?
You can have multiple wage garnishments in California. However, the rules for the maximum payment amount still apply. The state will add the payments for all the garnishments, treat it as one payment, then apply the maximum payment rule. Child support is not a part of this calculation.
How do I stop child support garnishment in California?
There are two ways to stop child support garnishments in California. You can hire an attorney to petition the court that originated the child support garnishment to issue a new order. Second, you can provide the court with evidence that you have been making child support payments and would like to stop these payments. Other ways to stop making payments can happen for the following reasons:
• Your child turns 18 and has graduated high school
• Your child gets married or emancipated
• Your child passes away
• You can regain full custody of the child
What is considered disposable income?
Disposable income is income after mandatory state and federal tax deductions. Income after insurance, retirement, and other voluntary deductions do not apply to disposable income.
What are the garnishment laws in California in 2023?
California has many garnishment laws, but it is important to know that California law protects you from aggressive, deceptive, and unfair collection practices. There are laws restricting how much the state can garnish, and you have legal means to dispute the wage garnishment to reduce the amount or eliminate how much you owe without payment.
How does garnishment work in California?
There are several steps to garnishing wages once the state receives the right to withhold a portion of your wages from your employer. These steps include the following:
• The California FTB sues you and wins a judgment.
• The California FTB sends the paperwork from the judgment to your employer.
• Your employer must provide you with a copy of the garnishment paperwork within ten days after receipt.
• You can respond with an objection or exemption to the court within ten days of receiving the paperwork from your employer.
• The court will hold a hearing to determine the validity of your objections or exemptions.
• The wage garnishment will stop if the court rules in your favor and will return all garnished wages, or the garnishment will continue if the court rules against you.
Does California allow bank garnishments?
California allows bank garnishments through Electronic Funds Transfers (EFT) or Automated Clearing House (ACH) debits or credits.
How to stop FTB garnishment?
There are several ways you can stop wage garnishments. First, you should review your paperwork and contact a lawyer if you believe your employer withholds more money from your paycheck than the law allows. You can negotiate a settlement where you can have a lesser amount taken from your paycheck, or you may be able to wipe out the debt by making a one-time payment that is less than the amount owed.
Second, you can file for bankruptcy. Filing for bankruptcy automatically stops all creditor actions, including garnishments and lawsuits, except in rare special circumstances. You should contact a bankruptcy attorney to see if this is the right option.
Finally, you can challenge wage garnishment because you suffer from financial hardship. You can request a court hearing for your case, and the judge will decide based on your financial condition. Working with an attorney will be helpful in this situation.
What is the California FTB phone number?
People can call several phone numbers to get more information about their taxes and resolve any tax issues. The California FTB has three numbers for general income tax customer service. These numbers include the following:
• 800-852-5711 (Weekdays from 8 am to 5 pm PST excluding holidays)
• 916-845-6500 (For calls from outside the U.S.)
• 800-338-0505 (24/7 automated help to request forms, refund status, payments, and balance due)
What is the California FTB levy phone number?
The California FTB also has several numbers for levies. These numbers include the following:
Personal Income Tax Collections
• 800-689-4776 (Weekdays 8 am to 5 pm PST excluding holidays)
• 916-845-4470 (For calls outside the U.S.)
Business Income Tax Collections
• 888-635-0494 (Weekdays 8 am to 5 pm PST excluding holidays
• 916-845-7033 (Corporations – for calls outside the U.S.)
• 916-845-7166 (Limited Liability Companies – for calls outside the U.S.)
• 916-845-7165 (Partnerships – for calls outside the U.S.)
How often can the California FTB levy your bank account?
The California FTB can levy a bank account once a month. They will do this through an Electronic Funds Transfer (EFT) or Automated Clearing House (ACH) debit or credit.
Who can garnish wages in California?
An employer can garnish wages in California under two conditions. The first condition is when the state mandates the employer to garnish the wages of one or more employees. The second condition is when the employee permits the employer to garnish wages to cover insurance premiums, retirement or pension plan contributions, and health plan contributions.
When the employer has a mandate from the state to garnish wages, the employer must receive the payment and send it to the California FTB. The employer must know how much money to send and send the monthly payment with the employee’s acknowledgment and a copy of the order with every payment.