There is a California state tax levy on your pay stub because you did not pay your full tax obligation or did not pay enough taxes. A wage garnishment is a type of tax levy that you will find on your pay stub. The California Franchise Tax Board (FTB) will contact your employer to have them withhold a certain amount of money from your paycheck to pay the taxes you owe. The California FTB and your employer will continue withholding this money until you pay off your tax obligation, including penalties and interest.
There are several tax levies the California FTB can use to force you to pay off your tax debt. Here is the information you need about tax levies and how to prevent or release a California FTB levy.
Wages, Bank Accounts, and Other Assets the California FTB Can Levy
The California FTB has the legal authority to seize your assets if you owe a tax debt. The FTB can levy your wages, bank accounts, personal property, and other assets. A levy can strain your finances, so it is important to know what a tax levy is, how to prevent it, and how to release it.
When can the California FTB issue a bank levy?
Before the FTB can issue a bank levy, the agency must send you a bank levy intent notice and give you 30 days to respond to the notice. The FTB will levy your bank account if you do not respond or come to a resolution during the 30-day timeframe. When the levy begins, the bank must hold your funds for ten days before the bank sends the funds to the FTB. You can still contest and reverse the levy during the ten-day timeframe.
Stopping a California FTB Tax Levy
The best way to stop a tax levy is to pay your full tax obligation. You can do this anytime, including during the 30-day waiting period after you receive the intent to levy your bank account notice. You can also contact the FTB to set up a payment plan or negotiate a settlement.
Ways to Get the FTB to Release a Levy
You can immediately get the California FTB to release a levy if you pay your full tax debt or present evidence the FTB recorded an error in its assessment. You can also agree to a monthly payment plan to release a levy. Here are the other ways you can get the California FTB to release a levy:
Get an FTB Levy Release for a Financial Hardship
The California FTB may release a levy if it causes financial hardship. You must demonstrate that the levy makes paying for your daily necessities harder. The FTB will require you to produce verifiable documentation of your financial situation, like bank records and pay stubs, to prove your claim.
Get an FTB Levy Release for Taking Someone Else’s Property
You can get the California FTB to release a levy if you can prove the levy is on someone else’s property. For example, you can set up a custodial account at a bank in your name for a child or elderly parents. All the money that goes into that account is in their name. If the FTB puts a levy on the custodial account, you can show proof that the money belongs to someone else to get a levy release.
Get an FTB Levy Release for Taking Exempt Funds
The California FTB is exempt from taking certain funds from your bank account. As a result, you can get a bank levy release and refund if you demonstrate the FTB took exempt funds to pay your tax debt. There are several types of exempt funds, which include the following:
• Veteran’s benefits
• Social Security benefits
• Unemployment benefits
• Worker’s compensation benefits
• Public pensions
Get a Levy Release for an FTB Levy Issued in Error
The California FTB may issue a levy in error. You must contact the FTB and speak to a representative to cancel the levy and get a refund. You can also request the FTB to refund any bank charges because of the levy.
Get an FTB Levy Release for Extraordinary Circumstances
The California FTB may release a levy because of extraordinary circumstances that impact your finances. These circumstances may include:
• A natural disaster that destroys financial records
• Advanced age
• Long-term sickness
Set Up a Payment Plan to Release a Levy
Setting up a payment plan with the California FTB is a great way to release a levy. You can work with the FTB to set up a monthly payment plan that pays off your tax obligation and fits your budget.
Orders to Withhold and Continuous Orders to Withhold
The California FTB uses two types of levies to seize assets. The FTB will use an Order to Withhold for a one-time levy of a large asset, like a car. The FTB will use Continuous Orders to Withhold for multiple levies, such as wage garnishments.
How long does it take for a bank levy to occur?
Your bank will hold the funds for ten days after receiving a levy notice from the California FTB. Then, the bank will send the funds to the FTB. This holding period will give you time to work with the FTB to prevent the levy.
Can the California FTB levy all your assets?
The California FTB can levy 100% of your assets. For example, if you have a $10,000 delinquent tax debt and $10,000 in assets, the FTB can seize all $10,000 in assets.
How much can the California FTB withhold from your income?
The FTB can garnish your disposable income from 5% to 25%. Disposable income is your income after deductions for federal and state income taxes, Social Security payments, and state disability insurance.
Can the California FTB levy wages from another payor?
The California FTB can levy a payor up to 25% and a business entity up to 100%.
Ways to Prevent an FTB Levy
Finding a way to prevent an FTB levy if you are having financial troubles is essential because removing it once it starts is difficult. You can prevent an FTB levy by setting up a payment plan, making an Offer in Compromise, claiming financial hardship, or showing the FTB made an error.
Ways to Stop a Tax Levy on Your Bank Account
You can stop the California FTB from putting a tax levy on your bank account in many ways. Here is how you can prevent this drastic measure from happening.
Stop a Tax Levy with a Hardship Request
A hardship request will not reduce the tax debt you owe, but it will give you time to improve your financial situation to pay your tax debt. You must prove a levy will put you in a financially difficult situation and prevent you from covering your basic living expenses before the FTB puts your account in hardship.
Stop a Tax Levy with an Offer in Compromise
You can negotiate with the California FTB if you want to pay your tax debt but cannot pay the full amount. An Offer in Compromise lets you pay less based on your current financial situation and assets.
Stop a Tax Levy by Paying the Full Tax Debt
The easiest and quickest way to stop a tax levy is to pay the full debt you owe. Yet, it can also be the hardest solution, especially if you are experiencing financial hardship. It is best to contact the FTB to let them know your intentions so they provide you a solution.
Stop a Tax Levy with an Installment Agreement
An installment agreement is a good way to pay off your tax debt and stop a tax levy while making monthly payments that fit your budget. However, you may still have a tax lien that shows on your credit report until you finish paying your debt.
Stop a Tax Levy by Filing Bankruptcy
There are better options than filing bankruptcy to stop a tax levy because it will damage your credit. Unfortunately, bankruptcy may be your only option. Bankruptcy will stop all collection efforts by the California FTB. It is best to seek a tax attorney’s advice before making this decision.
Tax Levy Overview
The California FTB can legally seize your assets if you owe a tax debt to the state. These assets can include money in a bank account, income, vehicle, and other personal property.
Tax Levy Description?
The California FTB uses a tax levy to collect tax debt. The FTB will garnish wages, seize assets, levy bank accounts, and seize other personal property. The agency will also collect penalties, fees, and interest in addition to the tax debt.
What are the requirements before the IRS issues a tax levy?
There are four requirements before the IRS issues a tax levy:
• They must assess your tax issue and send you a Notice and Demand for Payment.
• You do not pay the tax after receiving the notice.
• The IRS sends you a final notice and intent to levy.
• The IRS will have a hearing 30 days before starting the levy.
What are the consequences of a tax levy?
A tax levy has several consequences, including a smaller paycheck, a frozen bank account, asset seizure, and a derogatory mark on your credit report.
Getting a Tax Levy Release
You can get a tax levy release by doing the following:
• Paying the full tax debt
• Setting up a payment plan
• Agreeing to an Offer in Compromise
• Proving financial hardship
• Filing for bankruptcy
• Proving the FTB made an error
Frequently Asked Questions
What is a California state tax levy?
The California FTB will use a tax levy to collect unpaid taxes. The agency can seize your bank account, wages, personal property, and other assets to pay your tax debt, late payment penalties, fees, and interest. You can get a levy release by paying your tax debt in full, agreeing to a payment plan, offering a settlement, or claiming financial hardship.
Why do I owe California taxes?
There can be several reasons why you would owe taxes in California. Some common reasons include not paying your full tax debt, receiving a tax penalty for filing a tax return late or making an error on your tax return. Other reasons can include a business tax debt, a change in your marital status, or changes in your credits or deductions.
Why do I have a California underpayment penalty?
You will receive an underpayment penalty if you do not pay enough estimated yearly taxes. The penalty can range from 5% to 25% from the original tax filing due date.
What happens if you owe California state taxes?
You can do several things if you owe taxes before the California FTB proceeds with the collection process. You can:
• Pay the entire amount you owe
• Ask a tax professional to help you get an extension
• Apply for a payment plan if your tax bill is less than $25,000
California Tax Levy Phone Number
There are two phone numbers that you can call about a personal tax levy:
• 800-689-4776 (Weekdays, 8 am to 5 pm)
• 916-845-4470 (For calls outside the US)
How often can the franchise tax board levy your bank account?
The California FTB can levy your bank account every month. The FTB will send you a notice letting you know you have a tax debt, explain your rights, and give you a deadline to respond. The FTB has a ten-day waiting period before they can levy your bank account.
How to Stop Franchise Tax Board Garnishment
Stopping an FTB garnishment can be challenging but possible. You can try to prove the FTB made a mistake, the funds are exempt, or the funds belong to someone else. Proving this can be difficult and may require the help of a tax attorney. However, easier ways to stop a garnishment are to pay the amount you owe in full, set up a payment plan, or agree to settle for less.