How to Stop FTB Tax Levies in California

If you owe California state taxes, the Franchise Tax Board (FTB) can seize your real and personal property and/or garnish your wages. If you sell liquor, the FTB can also seize your liquor license. If you’ve recently been notified about an impending state tax levy, contact the FTB or reach out for help from a tax professional as soon as possible. 

To get help now, contact us at Ace Plus Tax Resolution today. We can help you deal with tax levies and other IRS and state tax problems. 

What Is a CA Tax Levy?

A tax levy is when the tax authorities seize your wages, bank accounts, and other real or personal property. California state law gives the FTB the right to garnish wages, seize personal/business property, and take away liquor licenses for unpaid taxes. The FTB can also seize assets you own that are under the control or possession of a third party.

Typically, the state starts with seizing your IRS tax refund. Conversely, if you owe federal taxes but not state taxes, the IRS can seize your state tax refund. If that doesn’t cover your unpaid taxes, the FTB will issue a withholding order to seize other assets. Although the process may vary depending on the situation, the agency tends to start with bank accounts and wages and then move to physical assets.

Types of FTB Withholding Orders

The FTB levies assets through the following types of withholding orders. 

• Personal income tax orders to withhold – If you have delinquent state income taxes, the FTB can collect 100% of all available assets up to your balance due.
• Orders to withhold for vehicle registrations – If you don’t pay your vehicle registration, parking tickets, or tolls, the FTB can also collect 100% of available assets after exemptions, up to the balance due.
• Orders to withhold for court-ordered debt collection – If you have a court-ordered debt collection, the FTB can also take up to 100% of assets after required exemptions, up to the balance due.
• Continuous order to withhold – These orders attach to payments you’re entitled to for up to 12 months. For example, wage garnishments are continuous orders to withhold.

As you can see, the FTB has the power to seize a wide variety of assets. However, only very specific assets, such as primary residences up to a certain value, vehicles up to a certain value, clothing, personal effects, work tools, unemployment benefits, worker’s compensation, certain disability payments, and certain pension payments, are generally exempt from seizure. 

Otherwise, the FTB can take nearly anything that you have, including payments due to you from other parties such as rent from your tenants and deposits from your payment processing service if you run a business that accepts credit cards. The state can also seize lottery winnings and unclaimed property due to you.

Fees for Tax Levies

When you don’t pay your state taxes, the FTB will add penalties and interest to your account. If the state moves forward with a tax levy, your balance will increase even more as the FTB adds cost recovery fees to your account. Cost recovery fees include collection fees, lien fees, and fees related to the cost of seizing and selling your property. 

How to Stop Tax Levies

The most effective way to stop a tax levy is to pay your taxes in full. If you cannot pay in full, contact the state or work with a tax professional to set up monthly payments. The FTB also allows qualifying taxpayers to settle their tax debts through the offer-in-compromise program, but to qualify, you must prove that your offer is the most that the state could collect through involuntary collections. Also, you can avoid involuntary collection by establishing that a financial hardship prevents you from paying your liability. 

Finally, if you file for bankruptcy, the FTB will typically stop all collection actions, including levies. Note that only some types of tax debt can be discharged in bankruptcy, and depending on the type of bankruptcy you file, you may need to make monthly payments on your tax debt.

What If the FTB Issues a Tax Levy in Error

Sometimes, the FTB makes mistakes. If the agency issues a levy in error, contact them at the number on your levy notice or reach out to a tax attorney for help. To get reimbursed for the levy fees, contact the FTB within 90 days of the notice date, and explain that you incurred the charges due to FTB’s error. The FTB should respond to your request within 30 days. 

Your Right to a Hearing

If the state improperly seizes your property, you have the right to request a hearing. Call or write to the FTB. During the hearing, you can explain why the FTB should withdraw the levy or stop the sale of your property.

FAQs About CA FTB Tax Levies

Here are answers to some of the most common questions people have about tax levies. If you have additional questions, please don’t hesitate to contact us directly.

How much can the FTB garnish from your wages?

The FTB can garnish up to 25% of your pay. To calculate your garnishment, your employer will subtract federal income tax, Social Security payments, state income tax, and state disability insurance from your gross income. Then, they will base the garnishment on your remaining wages. 

As of 2024, if your remaining weekly wages are under $217.50, the FTB will not garnish anything. If your weekly wages after the above deductions are between $217.50 and $290, the state will take everything over $217.50. If your weekly wages after the above deductions are $290.01 or more, the state will take 25% of your pay. For example, if your weekly wages are $300 after accounting for federal income tax and the other taxes noted above, the FTB will garnish $75.

How much can the FTB garnish for unpaid vehicle registration costs and court-ordered debts? 

For garnishments issued between Jan 1, 2022, and August 31, 2023, the FTB can garnish 25% of your disposable income or 50% of the difference between your weekly disposable income and the state minimum wage. Garnishments initiated after September 1, 2023, apply to 30% of your disposable earnings or 40% of the difference between your disposable earnings and the state minimum wages.

How much are continuous orders to withhold?

If the FTB issues a continuous order to withhold, it can take up to 25% of the payment if you’re an individual and 100% of the payment for business entities.

What should I do if the Franchise tax board took money from my bank account?

If you have delinquent tax debts, the FTB can seize the money in your bank account. Unfortunately, if the debt is legitimate, it’s difficult to reclaim the funds once they have been seized. However, if the FTB took the money in error or if the seizure is causing financial hardship, you should contact FTB as soon as possible to request a levy release, or get help from a licensed tax professional. 

Get Help With FTB Tax Levies

Tax levies can be financially devastating, and because of the fees involved, they typically increase your tax bill. If you need help avoiding or stopping a tax levy, contact us today. At Ace Plus Tax Resolution, James Cha, CPA, Certified Tax Resolution specialist has extensive experience helping individuals and businesses deal with state and federal tax problems. 

Our goal is to turn tax problems into joy, and we work closely with our clients to find solutions that work for their unique situations. If you’re ready to put your tax problems behind you, contact us to set up a consultation today.