CA Franchise Tax Board Installment Agreement Overview
Like the IRS and many states, the California Franchise Tax Board offers taxpayers many options to pay their taxes, including the ability to pay taxes owed overtime. The state allows both individuals and businesses to request monthly payments on FTB taxes. Keep reading for an overview of how to apply and what to expect.
Key takeaways - FTB Payment Plans
- Make payments for up to 60 months
- Provide a financial statement if owe over $25,000 or need more than 60 months.
- Individuals may apply online, over the phone, or thru mail. Businesses must call to apply.
Monthly Payment Plans for FTB Back Taxes
Taxpayers can generally get up to 60 months to pay off their taxes if the following statements are true:
- The liabilities must not exceed $25,000,
- The taxpayer must be able to pay off the tax debt within 60 months (five years),
- The taxpayer must file all past-due tax returns,
- The taxpayer must have a history of compliance with state tax regulations, and
- The taxpayer must not already be in an Installment Agreement.
If you don't meet the above criteria, you may still be able to set up a payment plan, but you will need to file FTB Form 3561. This is a financial statement, and it allows the FTB to look at your situation and decide if you should get a payment plan even though you owe over $25,000, need extra time to pay, or have a history of non-compliance.
How to Apply for a Payment Plan on FTB Taxes
Individuals can set up installment agreements on the FTB's website, by mailing an Installment Agreement Request to the FTB, or by calling the FTB (800) 689-4776. Businesses must call (888) 635-0494 to request a plan. If out of the country, call 916-845-7033 for corporate payment plans, (916) 845-7166 for LLCs, and (916) 845-7165.
Note that you cannot apply online if there is a tax warrant, bank levy, or wage garnishment already issued against you. Instead, just call the FTB or reach out to a tax pro for help.
The FTB may request financial details to confirm your eligibility - generally, the agency wants financial details if you owe over $10,000 and need more than 36 months to pay.
Benefits of FTB Installment Agreements
Setting up a payment plan with the California FTB can significantly reduce future tax penalties, reduce the chance of getting a tax lien placed, prevent tax levies, and also release tax levies. When you make a voluntary payment arrangement with the state, they agree to not enforce involuntary collections against you.
CA FTB Installment Agreement Conditions
The taxpayer must agree to the following Taxpayer Installment Agreement Conditions while in an Installment Agreement:
- Pay a $34 set-up fee that the FTB adds to the balance due
- Make monthly payments until the taxpayer pays the entire tax bill in full
- Pay by automatic withdrawal from a bank account
- Make sure to keep enough funds in the bank account to make the monthly payment
- File all future income tax returns on time
- Pay all future income taxes on time
- Adjust any W-4 and DE-4 forms so that the taxpayer will not owe taxes in the future
- Make all estimated tax payments, if required
Finally, the taxpayer will still be subject to all of the FTB’s offset programs regarding applying state tax refunds to offset current state tax liabilities, or, in some cases, to be sent to the IRS to offset federal tax liabilities. Moreover, Installment Agreements where the taxpayer is required to confirm a financial hardship are subject to periodic review. In other words, it means that the taxpayer may be required to update financial information periodically (generally each year), and their monthly payment figure may be adjusted accordingly, depending on their current financial situation.
What Is FTB Tax Compliance?
To be considered compliant with California state tax regulations, you must do the following:
- File required state tax returns on time.
- Pay tax debts on time and in full.
You also must follow through on requirements related to your installment plan. If you agree and then fail to do the following, the FTB will also consider you to be non-compliant:
- Making installment agreement payments as scheduled.
- Providing financial statements if requested.
- Submitting documents related to the collection or cancellation of tax.
To get a payment plan, you must be compliant, but you must also stay compliant to keep your plan. If you fail to file taxes or make payments as required, the FTB can rescind your payment agreement.
FTB Acceptance Determinations
The FTB states that they make acceptance determinations based upon the taxpayer’s current ability to pay the liability and their compliance record.
If the FTB accepts the Installment Agreement request, the FTB will send a notice to the taxpayer confirming the monthly payment amount and the due date for each monthly payment. However, if the taxpayer fails to maintain compliance with the conditions stated above, the FTB reserves the right to terminate the Installment Agreement. Before the FTB terminates an Installment Agreement, they will send a notice to the taxpayer 30 days before termination. The FTB notice will state the reason(s) for termination and provide instructions regarding the taxpayer’s rights.
If the FTB Rejects the Installment Agreement
If the FTB rejects the Installment Agreement request, the taxpayer can file for an independent administrative review. As a result, the taxpayer needs to send the request in writing within 30 days from the date of the rejection letter. The taxpayer should mail it to:
Executive and Advocate Services MS A381
Franchise Tax Board
PO Box 157
Rancho Cordova, CA 95741
What If I Don't Get a Response?
If the FTB doesn't respond to your payment plan request within 30 days, you should call them. You can check the status of your application online if you applied online. Otherwise, the agency should send a response to phone or mail applications within 30 days.
If You Do You Not Qualify
If you do not qualify for an installment agreement, taxpayers may want to consider working with a tax professional who has experience with Franchise Tax Board tax cases. There are other options for taxpayers including offer in compromise where you settle with the FTB for less than owed. Above all, a licensed tax professional can review their financial situation, tax situation, and determine all options available.
How to Make Monthly Payments
You may set up automatic bank drafts when you apply for the payment plan - if so, you can choose any date from the first to the 28th for your withdrawal. Or, pay online through Web Pay by bank draft or credit/debit card. You may also mail in a check or money order - make the payment to the Franchise Tax Board, write your account number on the memo line, and send it to:
STATE OF CALIFORNIA
FRANCHISE TAX BOARD,
PO BOX 942867
SACRAMENTO CA 94267-0011
The FTB encourages taxpayers to submit monthly payments while they are waiting for a response on their installment agreement request.
What If These Taxes Are Due to My Spouse or Former Spouse?
You may qualify for relief through the FTB's innocent spouse program if your spouse or former spouse incurred tax debt without your knowledge. The FTB takes several elements into account and if you qualify for relief, you generally do not have to pay your spouse's tax liability and instead are only held responsible for your portion of the bill.
Help With California Installment Agreement and TaxCure
At TaxCure, we have a large network of tax professionals with a variety of specialties. We made it easy for taxpayers to find the best professional to help with the particular tax agency problem they are experiencing. You can view the top-rated professionals to help with a California installment agreement. Or browse top tax professionals by license type below that are located in California.
Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or a licensed tax professional.