Owing old balances to the Franchise Tax Board (FTB) can be a stressful experience. Whether it’s due to a failure to file taxes, underpayment of taxes, mistakes on tax returns, audit adjustments, or non-payment of previous balances, it’s important to take steps to pay the dues or late payment penalty as soon as possible to avoid late filing penalty and interest accrues.
In this blog, we’ll discuss how to review your account with the FTB and franchise tax board common penalties. We’ll also discuss how to set up a payment plan, pay the dues, and consider a settlement when a taxpayer fails to pay dues timely.
Reasons that could Lead to Owing Old Balances with FTB
There are several circumstances when a taxpayer fails to pay all dues and owe old balances with the Franchise Tax Board (FTB) which are as follows:
- Failure to file taxes: If you fail to file your California state income tax return on time, the FTB may assess a late filing penalty and interest charges on any unpaid tax owed, which can lead to late payment penalty.
- Underpayment of income taxes: If you did not pay enough taxes throughout the year, either through withholding or estimated tax payments, you may owe a balance to the FTB at the end of the year, leading to late payment penalty.
- Mistakes on tax returns: This is another reason behind late payment penalty. If you made errors on your tax return, such as forgetting to include income or claiming incorrect deductions, you may owe additional taxes and penalties to the FTB.
- Audit adjustments causing late payment penalty: If the FTB audits your tax return and determines that you owe additional taxes, penalties, and interest, you will need to pay the balance owed revealed in the tax return audit.
- Non-payment of previous balances: If you owe previous balances to the FTB that were not paid in full, penalties and interest charges will continue to accrue until the balance is paid in full. This is another reason behind the late filing penalty.
If you owe an old balance with the Franchise Tax Board (FTB), here are some steps suggested by CPA Ontario you can take to pay the dues and avoid late filing penalty:
Review Your Account with the FTB
The first step in settling old balances and a late payment penalty with the FTB is to review your account. This involves accessing your FTB online account or creating one if you haven’t already. Once you are logged in to your account, click on the “View Account” link to access your account summary. This will show any balances owed to the FTB, including maximum penalty and interest penalties by the original due date.
If you have received any notices or letters from the FTB, review them carefully to determine the amount due and any maximum penalty or interest penalties assessed. If you are unable to access your account online or have questions about the amount due, you can contact the FTB by phone or mail. The FTB can provide you with a current balance due and payment options.
Set Up a Payment Plan with the FTB
If you owe a balance of $25 or more, you may be eligible for a payment plan with the FTB. To determine eligibility, download and complete form FTB 3567 from the FTB website. This form requires you to provide your personal and financial information, as well as choose a payment option, such as automatic debit, credit card, or check or money order.
Depending on your circumstances, you may need to attach additional documents to your payment plan request, such as proof of income, bank statements, or a business plan. Once you have completed the “plan for payment” request form and attached any necessary documents, submit it to the FTB by mail or fax. You should receive a response within a few weeks.
Once your payment plan has been approved, you must make your payments on time each month to avoid additional maximum penalty, interest charges, and all other penalties. If you are unable to make your payments on time, contact the FTB to discuss your options.
Pay the Dues to the FTB
If you prefer to pay your unpaid tax in full, there are several ways to do so. You can pay online through the FTB’s website using a debit or credit card or by setting up a direct debit from your bank account. You can also make a payment by phone by calling the FTB’s automated phone system and following the prompts. If you prefer to pay by mail, you can send a check or money order along with your payment voucher to the FTB’s address listed on the voucher.
When making a payment, be sure to include your account number and the income tax year for which you are making the payment. If you are unable to pay the full balance, make a partial payment to reduce the amount of common penalties and interest accrues.
Consider a Settlement
If you have a significant financial hardship that leads to failure to file and prevents you from paying your balance in full, you may be eligible for a settlement with the FTB. To be eligible for a settlement, you must have filed all required income tax return and be current on any income tax payments due.
To apply for a settlement for failure to file taxes, gather documentation that shows your financial hardship, such as bank statements, pay stubs, and proof of expenses. Complete the Offer in Compromise (OIC) application, which is available on the FTB website. You will need to provide detailed financial information and explain why you are unable to pay your balance in full. Once you have completed the OIC application and gathered all necessary documentation, submit it to the FTB for review. You can submit the application online or by mail.
It’s important to note that the FTB may request additional information and it can take several months for the FTB to make a decision on your application. If your application is approved, you will be required to make a lump-sum payment or a plan for timely payments to pay the agreed-upon settlement amount.
Consult with an Income Tax Professional or Attorney
Settling old balances, in case of failure to file taxes, with the FTB can be a complex process, especially if you have multiple balances owed or if you are experiencing financial hardship. If you are unsure of how to proceed or need assistance, it may be helpful to consult with tax professional, certified accountants, or attorney. Such a professional can help you fulfill your total tax liability or tax obligations for your taxable income.
A tax professional can review your account with the FTB, help you determine your eligibility for a payment settlement, and assist you in completing the necessary forms and documentation. An attorney can provide legal advice and represent you in negotiations with the FTB.
It’s important to choose a reputable tax professional or attorney who has experience in dealing with the FTB and settling tax debts. Be sure to ask for references, check their credentials and experience, and verify their licensing and accreditation. They will help you by providing the right tax advice and help gather necessary supporting documentation.
In conclusion, owing old balances to the FTB can be a stressful experience, but there are steps you can take to pay your dues and avoid penalties and interest charges. Review your account with the FTB, set up a payment plan, pay the dues, and consider a settlement if you have a significant financial hardship. If you need assistance, consult with a tax professional or attorney from CPA accounting firm who can guide you through the process and help you achieve a resolution with the FTB in case of failure to file dues.
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