How to Stop Franchise Tax Board Garnishment: A Definitive Guide

The Franchise Tax Board (FTB) garnishing your wages or levying your bank account can be a deeply unsettling experience. It signals not just a financial crisis, but also the potential disruption of your entire livelihood. The good news? It’s rarely an insurmountable situation. Let’s cut straight to the chase:

To stop an FTB garnishment, your immediate action should focus on these key strategies:

1. Contact the FTB Immediately: Communication is paramount. Call the FTB directly and speak to a representative. Express your willingness to resolve the debt and understand the exact amount owed, including penalties and interest.
2. Determine the Reason for Garnishment: Uncover the source of the debt. Is it due to unpaid income tax, penalties, or some other assessment? Knowing the precise reason will guide your strategy.
3. File an Appeal or Protest: If you believe the assessment is incorrect, file a formal appeal or protest with the FTB within the specified timeframe. This can temporarily halt the garnishment while your case is reviewed.
4. Negotiate an Installment Agreement: The FTB often offers installment agreements, allowing you to pay off the debt in manageable monthly installments. This can stop the garnishment if the FTB approves your agreement.
5. Offer in Compromise (OIC): An OIC allows you to settle your tax debt for less than the full amount owed. This is typically an option if you can demonstrate significant financial hardship. Acceptance of an OIC will immediately stop the garnishment.
6. Hardship Relief: If you are experiencing severe financial hardship, you may be eligible for temporary relief from garnishment. This requires demonstrating that the garnishment is creating an undue burden on your ability to provide for yourself and your family.
7. Bankruptcy Filing: Filing for bankruptcy, particularly Chapter 7 or Chapter 13, can automatically stay most garnishments, including those from the FTB. However, this should be considered a last resort due to its long-term implications.
8. Seek Professional Help: A qualified tax attorney or Enrolled Agent can provide expert guidance, negotiate with the FTB on your behalf, and explore all available options for resolving your tax debt. This can often lead to a more favorable outcome.

Understanding FTB Garnishment

Before diving deeper into solutions, it’s crucial to understand what an FTB garnishment is and how it works. The FTB has broad powers to collect unpaid taxes in California. Garnishment is a legal process where the FTB orders a third party (like your employer or bank) to withhold funds from your wages or account and remit them to the FTB to satisfy your tax debt.

The FTB can garnish your wages, levy your bank accounts, and even seize assets. They do this after sending notices of deficiency and demand for payment. If you ignore these notices or fail to respond within the specified timeframes, the FTB will proceed with collection actions, including garnishment.

Proactive Steps to Avoid Garnishment

Prevention is always better than cure. Taking proactive steps to stay on top of your tax obligations can help you avoid garnishment altogether.

• File your taxes on time: This seems obvious, but late filing is a major trigger for FTB scrutiny.
• Pay your taxes in full: If you can’t pay in full, explore payment options like installment agreements before the FTB starts collection actions.
• Respond to FTB notices promptly: Ignoring FTB notices will only escalate the situation. Address them quickly and professionally.
• Keep accurate records: Maintaining thorough and organized financial records will help you accurately file your taxes and respond to any FTB inquiries.

Frequently Asked Questions (FAQs)

Here are some frequently asked questions to provide further clarity and guidance:

1. What type of income can the FTB garnish?

The FTB can garnish a wide range of income, including wages, salaries, commissions, bonuses, retirement income, Social Security benefits (with limitations), and unemployment benefits. However, certain types of income, such as Supplemental Security Income (SSI), are generally exempt from garnishment.

2. How much of my wages can the FTB garnish?

The amount the FTB can garnish from your wages is limited by law. The FTB typically uses a formula based on your disposable earnings (earnings after legally required deductions). You are generally allowed to keep a certain portion of your wages to cover basic living expenses.

3. What is a bank levy, and how does it differ from a wage garnishment?

A bank levy is when the FTB seizes funds directly from your bank account to satisfy your tax debt. A wage garnishment, on the other hand, involves your employer withholding a portion of your wages and sending it to the FTB.

4. How long does an FTB garnishment last?

An FTB garnishment will continue until the tax debt, including penalties and interest, is paid in full or until you successfully negotiate an alternative resolution, such as an installment agreement or an OIC.

5. Can the FTB garnish my spouse’s wages for my tax debt?

Generally, the FTB can only garnish your spouse’s wages if you filed a joint tax return and both of you are liable for the tax debt. If you filed separately, your spouse’s wages are typically protected.

6. What is an Offer in Compromise (OIC), and is it right for me?

An Offer in Compromise (OIC) allows you to settle your tax debt for less than the full amount owed. The FTB will consider an OIC if you can demonstrate that you are experiencing significant financial hardship and are unable to pay the full debt. Factors like your income, assets, expenses, and ability to earn are considered.

7. What is the difference between an FTB lien and an FTB levy?

An FTB lien is a legal claim against your property, giving the FTB the right to seize and sell your assets to satisfy your tax debt. An FTB levy is the actual seizure of your property, such as wages or bank accounts, to collect the debt. A lien typically precedes a levy.

8. How do I file an appeal or protest against an FTB assessment?

To file an appeal or protest, you must do so within the timeframe specified in the FTB’s notice, typically 30 days. You will need to provide documentation and evidence to support your claim that the assessment is incorrect. Consult the FTB’s website or a tax professional for specific instructions.

9. What is “Currently Not Collectible” (CNC) status?

Currently Not Collectible (CNC) status is granted by the FTB when you demonstrate that you are unable to pay your tax debt due to severe financial hardship. While in CNC status, the FTB will temporarily suspend collection actions, including garnishment, but the debt will continue to accrue interest and penalties.

10. What is the role of a tax attorney or Enrolled Agent in stopping an FTB garnishment?

A tax attorney or Enrolled Agent can provide expert guidance, negotiate with the FTB on your behalf, and represent you in tax disputes. They understand the complexities of tax law and can explore all available options for resolving your tax debt, potentially leading to a more favorable outcome.

11. How can I find a qualified tax professional to help me with my FTB garnishment?

You can find a qualified tax professional through referrals from friends, family, or colleagues. You can also search online directories or contact professional organizations like the California Society of Enrolled Agents or the State Bar of California for referrals to qualified tax attorneys. Always check their credentials and experience before hiring.

12. What should I do if I suspect the FTB is garnishing my wages or levying my bank account in error?

If you believe the FTB is garnishing your wages or levying your bank account in error, contact them immediately. Gather any supporting documentation, such as proof of payment or corrected tax returns, to support your claim. Filing an appeal or protest may be necessary to halt the collection action while the matter is investigated.

Dealing with an FTB garnishment can feel overwhelming, but by understanding your options and taking prompt action, you can navigate the process effectively and work towards a resolution. Remember, proactive communication and professional guidance are invaluable assets in protecting your financial well-being. Don’t delay seeking help – the sooner you address the issue, the better the outcome will likely be.