California and federal tax agencies use different approaches to collect taxes that are not paid on time. One common approach is a tax levy where the government claims or seizes what you owe from your various assets. A California tax attorney can help you deal with the challenges that come with a tax levy.
In California, the Franchise Tax Board (FTB) can seek payment of your tax debt through a levy on your personal property, also known as “Order to Withhold.” California Revenue and Taxation Code Sections 18817 and 18670 are key provisions of the tax law that apply in these cases. In accordance with these sections, you will receive a notice from the Franchise Tax Board indicating that the state plans to move forward with a tax levy on your property. A similar notice will be sent by the federal tax agency – Internal Revenue Service (IRS), usually with 21 days to respond. You will have a right to a hearing to appeal the decision. Responding early to both of these notices is critical in preventing the state or federal government from getting access to personal property that should not be included in the tax levy.
What can be taken through a tax levy?
A California tax levy or order to withhold can be quite broad. It can focus on various types of personal property, including checking and savings accounts, salary, real estate, and other personal property (such as jewelry, cars, etc.). Similar types of personal property can be the subject of an IRS tax levy too. A levy on your checking or savings account will result in a 10-day hold being placed on your account by the bank. This will be followed by the bank sending a money transfer to FTB. People receiving a notice of a tax levy can delay this money transfer. Working with an FTB representative to resolve the problem or demonstrating financial hardship are possible ways to delay the transfer. Older adults can also request unique treatment because of the financial limitations they have. Another way to prevent a transfer is when the money in your account belongs to another person – such as money you are holding for another family member. Again, an early and swift response to any notice that is received will help decrease financial harm. A tax lawyer can help you determine which funds or property may be exempt from the levy. One example of an exemption is veteran benefits.
Responding to a tax levy
If you have received a tax levy, you probably do not agree with the tax debt that CA FTB or the federal government have assigned to you. However, if you do agree, you can prevent a tax levy from existing by working to pay the levy as soon as possible. You may be able to set up a payment plan. In CA, you can also make an Officer in Compromise. It's a compromise between you and the state regarding the amount owed. This will typically be done if you are seeking to settle the debt in full. Other actions, such as legal challenges or bankruptcy, can be explored with a qualified CA tax attorney.
CA and federal limitations on wage garnishment
As stated, wages can be the subject of a tax levy. However, there are limits to how much the FTB will remove from your wages. Similar to federal tax law, the CA FTB is not allowed to garnish more than 25% of your wages after deductions (such as social security and health care benefits). At the federal level, the Consumer Credit Protection Act prevents employees from losing their jobs if their wages are garnished. For lower-income people in CA, there are additional protections. At the federal level, your number of dependents also impacts this amount. Wage garnishment requires withholding part of your salary. This approach is also used for child support payments. The amount being withheld is sent to the FTB.
A CA Tax Attorney Can Help!
Contact a California tax attorney to discuss these issues and the best strategy for you. Call or go online now to schedule a free consultation.