Guide to Resolving California Back Taxes & Other Tax Problems

If you are facing problems paying California State taxes, the State, just like the IRS, offers solutions to not only extend a filing but also a payment, with an Installment Agreement if you cannot pay your taxes in full. In rare cases, the Franchise Tax Board will consider an Offer In Compromise (a rare but way of actually paying less than you owe).

The State of California Franchise Tax Board is the state agency that is responsible for administering the state’s personal income tax program, as well as the corporate tax program. Generally, individual taxpayers must file their income tax returns with the Franchise Tax Board, make payment of individual state taxes due and owing to the Franchise Tax Board, and settle any individual state tax-related disputes with the Franchise Tax Board.

CA Installment Agreement (Payment Plan)

If you cannot pay your state taxes owed in full, you may be able to enter into an installment agreement with the California Franchise Tax Board that allows you to repay your state taxes owed over time. Although an installment agreement does provide for interest and penalties on your unpaid taxes owed until it is paid in full, it does offer an option if you are financially unable to pay off your taxes owed when it is due.

You may be eligible for an installment agreement if your taxes owed is not greater than $25,000, you can repay your taxes owed within five years, you have filed all of your required income tax returns, you are not currently paying a taxes owed under an installment agreement, and you do not currently have an Order to Withhold, Continuous Order to Withhold or an Earnings Withholding Order for Taxes against you. Additionally, if your taxes owed is more than $10,000, or if your installment agreement will last more than three years, then you must certify to the California Franchise Tax Board that you have a financial hardship that prevents you from paying your taxes owed in full.

You can request an installment agreement in three different ways:

1. Apply online at https://www.ftb.ca.gov/online/eIA/Apply_Online.asp
2. Apply by phone using the Interactive Voice Response (IVR) system at 1-800-689-4776 during normal business hours.
3. Apply by mail by completing and signing page three of form FTB 3567 and mailing it to the following address: State of California, Franchise Tax Board, P.O. Box 2952, Sacramento, CA 95812-2952.

Offer In Compromise

There are some situations in which you may be unable to pay your state taxes owed now or in the foreseeable future, due to financial hardship or a lack of assets, income, or means to do so. In this case, you may be eligible to request an offer in compromise from the California Franchise Tax Board, which suggests a lump sum amount that you can pay toward your taxes owed.

Generally, an offer in compromise will be approved if the amount offered is the most that the California Franchise Tax Board can reasonably expect to collect from you within a reasonable period of time. Each case is considered individually, based on factors such as your ability to pay, the assets that you own, your present and future income, your present and future expenses, and the potential for changed circumstances in the future.

In order to qualify for an offer in compromise, you must have filed all required income tax returns, fully completed the application for offer in compromise, along with all supporting documentation, agreed to the amount of tax that you owe, and authorized the Franchise Tax Board to obtain your credit report and verify the information reported on your application.

The application for an offer in compromise can be requested here Form FTB 4905 PIT Booklet. This booklet also contains a checklist of the required documentation that you must submit with your application for an offer in compromise. You also can request a booklet by calling 1-800-338-0505, selecting “personal income tax form requests,” and entering Code 971. For more information about offers in compromise, you can call 1-916-845-4787.

CA Tax Filing Extensions

There is no need to file an extension in California, as taxpayers automatically get filing extensions till October 15th. All you need to do is file by October 15th. Realize that this is not an extension to pay, but an extension to file. Figure out what you owe and pay it by 4/15 in order to avoid incurring additional penalties and interest.

Taxpayers’ Rights Advocate’s Office

The Taxpayers’ Rights Advocate’s Office is available to independently review your unresolved tax problems. You also can ask general tax questions and get information about the California state tax system.

You can reach the Advocate Hotline at 1-800-883-5910.

You also can reach the Taxpayers’ Rights Advocate’s Office by email and by U.S. mail at Executive Liaison Section MS A381, Franchise Tax Board, P.O. Box 157, Rancho Cordova, CA 95741-0157.

Our Simple Tax Relief Process