When you owe the state of California back taxes, the various state tax agencies may issue a lien or levy against you to collect the debt. Liens and levies can be severe; avoiding them as much as possible is in your best interest. A professional tax attorney can help you resolve your tax issues and answer all your questions about California liens and levies.
What Are Liens and Levies?
Liens and levies are ways the state of California tries to collect tax debt from taxpayers. A lien is a hold that the state puts on your property—it doesn't seize your property or assets but takes out an interest against them. If you earn income from your property, but it has a lien, the income goes to the state of California first to help pay off your debt. A levy, on the other hand, is when the state seizes your property.
The three main tax agencies that issue liens and levies are the Franchise Tax Board (FTB), the California Department of Tax Fee and Administration (CDTFA), and the Employment Development Department (EDD).
Liens and Levies from the FTB
The FTB can issue liens against taxpayers to collect taxes owed. You'll receive a Notice of State Tax Lien against you when the FTB attaches a lien to your real and personal property. Real property is vacant land, buildings, or real estate that you own. The personal property that the FTB takes liens against could be business equipment and assets, mobile homes, cars, and trucks. Liens from the FTB are public record and searchable online.
The FTB also issues levies against taxpayers, allowed the agency to seize your property. The FTB calls a levy an Order to Withhold, and it can result in the following actions:
- Seizing bank account funds
- Seizing ownership of real and other property
- Garnishing wages
Liens and Levies from the CDTFA
The CDTFA assesses and collects sales and use tax in California. If a business or seller doesn't pay the proper amount of sales or use tax owed, the CDTFA will invoke a lien against their property. A lien stays on your credit record for seven years. To have a lien removed, you must set up a payment plan with the CDTFA. The CDTFA can also levy your real and personal property, including your bank account and wages.
Liens and Levies from the EDD
If you fail to file and pay your payroll taxes, the EDD can take collection actions against you. The agency sends you a Notice of State Tax Lien and keeps the lien on your real or personal property until the debt is repaid in full.
The EDD can also levy your business bank account to collect the tax you owe. Any deposits you make into this account over the next year are remitted to the EDD.
Questions About California Liens and Levies
Dealing with collection from California's tax agencies can be overwhelming and lead to serious consequences. If you have questions about liens and levies, contact a California Tax Attorney today for an initial consultation.