Many taxpayers are familiar with the IRS’s 10-year collection statute and assume California follows the same rules. Unfortunately, that is not always the case.
If you owe taxes to the California Franchise Tax Board (FTB), the state’s ability to collect may last significantly longer than you expect.
The IRS and FTB Play by Different Rules
The IRS generally has 10 years from the date a tax is assessed to collect the liability. While certain events can extend that period, many taxpayers have heard of the IRS collection statute and assume it applies across the board.
California’s Franchise Tax Board operates under a different set of rules, and collection periods can be extended in numerous circumstances.
What Can the FTB Do to Collect?
The FTB has broad collection authority, including the ability to:
- Levy bank accounts;
- Garnish wages;
- Record state tax liens;
- Intercept tax refunds;
- Seize certain assets; and
- Suspend professional or occupational licenses in some situations.
Many taxpayers are surprised to learn that the FTB can be just as aggressive—and sometimes more persistent—than the IRS when collecting outstanding tax liabilities.
Ignoring the Problem Often Makes It Worse
A common misconception is that tax debt will simply disappear if enough time passes.
In reality, penalties and interest continue to accrue, and collection actions can become more aggressive over time. What may have started as a manageable balance can grow substantially if left unresolved.
Options May Still Be Available
Depending on the circumstances, taxpayers may qualify for relief options such as:
- Installment agreements;
- Financial hardship status;
- Penalty abatement;
- Settlement opportunities; or
- Challenges to the underlying assessment.
The sooner these options are explored, the more flexibility taxpayers typically have.
Don’t Assume You Are Out of Time—or That the FTB Is
Every case is different, and collection statutes can be complex. Before making assumptions about what the FTB can or cannot collect, it is important to understand how the rules apply to your specific situation.
If you have received collection notices from the FTB or have unresolved California tax liabilities, seeking guidance early can help you evaluate your options and avoid unnecessary enforcement actions.
Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense. Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board. Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.
For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC Tel: (949) 397-2292 (Newport Beach Office) Tel: (714) 463-4430 (Yorba Linda Office)
Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.