What if You Can’t Pay Your State Taxes?

Sacramento – As the April 18 tax deadline approaches, some taxpayers may wonder, “What if I cannot pay?”

“The good news is that help is available,” said Betty T. Yee, State Controller and Chair of the Franchise Tax Board (FTB). “FTB offers many options for taxpayers who face a temporary hardship and cannot pay their state income tax bill in full.”

File Your Tax Return

First and foremost, taxpayers should file their state tax returns on time and pay what they can. This will reduce penalties and interest down the road. Taxpayers who cannot fully pay their tax liabilities will receive a Statement of Tax Due about 30 days after they file. Once taxpayers receive this statement, they can request FTB assistance.

Payment Plans

FTB generally approves monthly installment plan requests if the balance owed is less than $25,000 and can be completely paid within five years. Tax liens typically are not filed on taxpayers approved for payment plans. Taxpayers can request a monthly installment plan online at ftb.ca.gov by selecting “Installment Arrangement” under the “Pay” column, or by calling 800.689.4776. Service is available in both English and Spanish.

Offer in Compromise

An Offer in Compromise (OIC) is for taxpayers who in the foreseeable future will not have the income, assets, or other means to pay their taxes. An OIC is an agreement between a taxpayer and FTB that settles the taxpayer’s liability for less than the full amount. FTB looks at the taxpayer’s income and assets to determine ability to pay. Absent special circumstances, FTB will not accept an offer if FTB believes the liability can be paid in full or through an installment agreement. For more information, go to ftb.ca.gov and search for “Offer in Compromise.”

Help with State Tax Liens

If you are subject to a state tax lien and are trying to sell or refinance your home, FTB can help. State tax liens typically must be paid before real estate can be sold or refinanced. If a taxpayer suffering a financial hardship is selling or refinancing a home for less than the loan balance, FTB can remove the tax lien to allow the sale to go through, generally within two weeks of the taxpayer submitting the required documents. However, the tax lien remains in effect on any other property the taxpayer holds or later acquires. For more information, go to ftb.ca.gov and search for “lien.”

FTB administers two of California’s major tax programs: the Personal Income Tax and the Corporation Tax. FTB also administers other nontax programs and delinquent debt collections, including vehicle registration debt collections on behalf of the Department of Motor Vehicles and court–ordered debt. Each year, FTB’s tax programs collect more than 70 percent of the state’s General Fund.

For more information on other taxes and fees in California, visit taxes.ca.gov.