If you owe taxes to the State of California, but you can't pay the entire amount by the deadline, you might be able to set up a payment plan. Paying in installments allows you to manage your tax debt and stay out of trouble with state tax agencies. Negotiating an installment agreement isn't always straightforward, however.
An experienced California tax attorney can help you deal with the state's various tax agencies and set up a favorable installment plan agreement.
What Is an Installment Agreement in California?
Many of California's state tax agencies allow you to set up an installment agreement plan if you can't pay your tax bill in full right away. Depending on which agency your agreement is with and the amount you owe, your payment plan could last between 12 months and five years.
Which California tax agencies provide installment agreements?
The three main tax agencies in California allow individual and business taxpayers to set up an installment agreement plan. These agencies are the Employment Development Department (EDD), the California Department of Tax Fee and Administration (CDTFA), and the Franchise Tax Board (FTB).
EDD Installment Plan Agreements
The EDD allows employers to pay their payroll taxes in installment plans if they can't pay the full amount upfront. To set up a payment plan with the EDD, you must contact your EDD representative and fill out Form DE 927B to negotiate an agreement. To qualify for an installment plan, you must be current with previous tax reporting and payments to the EDD, and not be insolvent or bankrupt.
You can negotiate either a short-term agreement or a long-term agreement with the EDD. To get a short-term payment plan, you must agree to pay your tax liability as soon as possible and make a good faith payment. For a long-term installment plan, you must submit more paperwork along with a good faith payment.
CDTFA Installment Plan Agreements
The CDTFA offers payment plans to taxpayers who can't pay their total past due amount right away. Plans are flexible, allowing taxpayers to pay in monthly, biweekly, or weekly installments and propose any payment amount above $10. Almost anyone is eligible for a CDTFA payment plan, as there are few restrictions to apply. You must have filed all your past tax returns for the CDTFA to process your request.
FTB Installment Plan Agreements
Both individual taxpayers and businesses can apply for installment plan agreements from the FTB. The application takes 90 days to process and costs $34 for individuals and $50 for businesses.
If you're applying for an installment plan for personal taxes, you must meet certain eligibility criteria:
- Your tax amount due is less than $25,000
- You're able to pay the full amount in five years or less
- You're up to date on income tax returns from the previous five years
Help with Tax Installment Agreements in Californi
Negotiating an installment agreement on your own may not guarantee the best results. If you want an installment agreement plan that fits your current financial situation, a qualified California tax attorney can help. Contact a California Tax Attorney today to set up a consultation and discuss your options.