Can the California Franchise Tax Board Levy My Bank Account?

The California Franchise Tax Board (FTB) has the authority to collect your delinquent tax balance via a bank levy under California Revenue and Taxation Code Sections 18817 and 18670. The FTB has the authority to take 100 percent of the balance owed directly out of your bank account. They can also garnish your wages and file tax liens against your property when collecting unpaid tax liabilities.

FTB Procedure for Filing a Bank Levy

The FTB will first mail you a notice informing you that you owe California income tax. The notice will explain your rights and the deadline to contact the FTB before they will begin collecting.

The FTB satisfies the requirement of providing notice to the taxpayer if they mail this notice to the taxpayer’s last known address. Unfortunately, taxpayers who have moved and failed to update their address with the FTB may never receive any notices, but the FTB is not required to send notices to your current address. They only have to send notice to your last known address.

If you receive a notice from the FTB, take action to resolve the issue. Contact a tax attorney if you need assistance from a professional. If you do not take action, then the FTB will proceed with their collections, including levying your bank account.

When the FTB levies your account pay off a state tax liability, your bank should inform you of this. The FTB levy is known as an OTW or Order to Withhold. While an IRS bank account levy requires a 21 day waiting period before the funds will be withdrawn, an FTB OTW only requires a ten day waiting period. It is therefore critical that you immediately act to dispute the tax liability or work out an agreement with the FTB to have the levy released if possible.

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Another distinction between IRS levies, and FTB Orders to Withhold is that the FTB can issue an OTW without granting you a hearing, and on minimal notice. The IRS must allow you the opportunity for a “Collection Due Process” hearing before they can issue a levy.

If the FTB files an erroneous levy that results in bank charges on your account, you can file to have these fees reimbursed, and have the funds put back into your account. If your account gets levied, and you don’t owe the tax keep in mind you may have as little as one year to file for a refund.

You have several options for resolving your tax issue before your bank account is levied. If you dispute the amount owed, you may be able to have your tax liability reduced with the help of a California tax attorney.

If you are unable to pay, you can also negotiate an installment agreement that allows you to pay back your tax debt over time. Taxpayers who are under financial hardship may also be eligible for an Offer in Compromise, which could resolve your tax debt for significantly less than you owe.

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