Full Answer
What is the difference between the IRS and the FTB?
While the IRS enforces federal income tax obligations, the California Franchise Tax Board (FTB) enforces state income tax obligations. The FTB can then move forward with the enforced collection action. Similar to IRS collection enforcement, FTB can levy the taxpayer’s bank account or garnish his or her wages.
What is the California Franchise Tax Board (FTB)?
[4] The Franchise Tax Board (FTB) is the California tax agency that collects and enforces state income tax assessment and collection. In many situations, the FTB operates similarly to the Internal Revenue Service (IRS).
What is the difference between corporate income taxes and franchise taxes?
They are the corporate income taxes and franchise taxes. They are not the same and the difference lies in what is being taxed and who in particular is doing the taxing. When we refer to income taxes, it applies to the profit of the business, however, franchise taxes do not apply to profit.
What is a payment not a franchise tax?
For some states, even without a physical presence of the business, a franchise tax is allocated if revenue is generated from the state like in the case of shipping of goods to buyers for sale. However, the payment not franchise tax depends on the rules and taxing system in a particular state of interest.
Is Franchise Tax Board the same as IRS?
While the IRS enforces federal income tax obligations, the California Franchise Tax Board (FTB) enforces state income tax obligations. A taxpayer will face collections actions by the FTB because they have ignored the obligation, refused to pay, or are unable to pay an outstanding tax balance that is due and owing.
What does a Franchise Tax Board do?
The Franchise Tax Board (FTB) is the agency responsible for collecting state personal income taxes in California.
Why do I owe the Franchise Tax Board?
The California Franchise Tax Board is responsible for collecting personal income tax and corporate income tax in the State of California. California taxpayers are required to pay their taxes to the FTB. However, after filing their taxes, many taxpayers still have an outstanding tax bill with the FTB.
Can the Franchise Tax Board take my federal refund?
We partner with TOP to offset federal payments and tax refunds in order to collect delinquent state income tax obligations. If a taxpayer has a California income tax debt and is entitled to a federal income tax refund, we are authorized to withheld from that refund, or offset it, to pay the balance due.
What happens if I don't pay the Franchise Tax Board?
Penalty. 5% of the amount due: From the original due date of your tax return. After applying any payments and credits made, on or before the original due date of your tax return, for each month or part of a month unpaid.
Where is my IRS refund California?
You can check on refund status by phone: 1-800-338-0505 or +1 (916) 845-6500 (outside the U.S.) Weekdays, 7 a.m. to 5 p.m. You can check on refund status by chat. Sign into MyFTB to chat weekdays, 7 a.m. to 5 p.m. The refund normally takes up to two weeks to receive if you e-filed and up to four weeks for paper return.
How do I avoid franchise tax in California?
One way to avoid paying franchise tax is to operate as a sole proprietorship or general partnership—but you would have to sacrifice the liability protection that LLCs and corporations enjoy. Some charities and nonprofits qualify for an California Franchise Tax Exemption.
What happens if I don't pay California Franchise Tax?
The California Franchise Tax Board imposes a penalty if you do not pay the total amount due shown on your tax return by the original due date. The penalty is 5 percent of the unpaid tax (underpayment), plus 0.5 percent of the unpaid tax for each month or part of a month it remains unpaid (monthly).
Do I have to pay California Franchise Tax?
Every corporation that is incorporated, registered, or doing business in California must pay the $800 minimum franchise tax.
How do I know if IRS is keeping my refund?
You may call us toll-free at 800-829-1040, M - F, 7 a.m. - 7 p.m. Generally, if the financial institution recovers the funds and returns them to the IRS, the IRS will send a paper refund check to your last known address on file with the IRS.
What is Franchise Tax Board deposit?
The deposit stands for Franchise Tax Board California State Tax Refund. This would NOT include your Federal refund, which will come separately.
Can the Franchise Tax Board take my social security?
Because the FTB is not classified as a creditor under federal law, it does not have the authority to directly levy taxpayer income from social security disability. However, the FTB may utilize other levies to collect an outstanding tax debt, including levies on personal bank accounts.
Do I have to pay California franchise tax?
Every corporation that is incorporated, registered, or doing business in California must pay the $800 minimum franchise tax.
Who runs the Franchise Tax Board?
Selvi Stanislaus was appointed Executive Officer of the Franchise Tax Board (FTB) on January 11, 2006. As FTB's fourth executive officer and the first woman to hold the post, Selvi oversees the second-largest tax department in the nation, with more than 6,000 employees in California and its three out-of-state offices.
Can the CA Franchise Tax Board garnish my Social Security?
Because the FTB is not classified as a creditor under federal law, it does not have the authority to directly levy taxpayer income from social security disability. However, the FTB may utilize other levies to collect an outstanding tax debt, including levies on personal bank accounts.
Does California have a Franchise Tax Board?
Franchise Tax Board (FTB) Our mission is to help taxpayers file tax returns timely, accurately, and pay the correct amount to fund services important to Californians.
Is FTB settlement harder than IRS settlement?
A rundown on the differences and similarities between IRS and FTB Offer In Compromises. FTB settlements are harder to come by than IRS settlement, but both can get accepted under the right conditions.
Is it easier to get an FTB settlement than an IRS settlement?
IRS Offers In Compromise are almost always easier to get than FTB Offers In Compromise. Here we go through the differences between IRS and FTB Offers In Compromise. Overall, it is easier to get an IRS settlement accepted than an FTB settlement. The main reasons being that the FTB will discriminate based on age and that the FTB balance is often much smaller than the IRS balance.
How to fight IRS audit in California?
California has income taxes, franchise taxes, sales and use taxes, property taxes, and excise taxes. There are nexus issues, withholding taxes, tough residency rules, and more. If you have an IRS dispute, you can fight it administratively with the auditor and at the IRS Appeals Office. If necessary, you can go to U.S. Tax Court, where you can contest the taxes before paying before a judge who decides only tax cases. Alternatively, if you are willing to pay the tax first, you could proceed to the U.S. Court of Federal Claims, or U.S. District Court. Many states have a state tax court, but California does not. For decades, it had the State Board of Equalization (SBE), a five-member administrative body—the only elected tax commission in the U.S.—that functioned much like a court.
How long does it take to get audited in California?
Take California’s long tax audit period. The basic IRS statute of limitations is three years. In some cases, the IRS gets six years, not three. But barring those kinds of exceptions, the IRS usually has three years once you file a return to audit. The California Franchise Tax Board administers California’s income tax. The FTB gets an extra year, so it has four years, not three. That sounds simple, just an extra year, but not so fast. Say that you are involved in an IRS audit, but the IRS has not yet issued a notice of deficiency (also called a 90-day letter, which must come via certified mail). You may want to drag your feet in the IRS audit, to try to put you outside California’s four-year reach. Hey, with a little delay, maybe you can outrun California’s four-year statute, you might think. Will that protect you from California’s follow-along ‘‘me, too’’ request for money?
What is the OTA in California?
It was a quirky and controversial system. But all of that changed in 2017 when California legislators enacted the Taxpayer Transparency and Fairness Act of 2017, which created the California Office of Tax Appeals (OTA). The OTA has jurisdiction for appeals related to taxes administered by the California Department of Tax and Fee Administration (CDTFA) and the Franchise Tax Board (FTB). That includes personal income taxes, corporate franchise taxes, sales and use taxes, LLC taxes and fees, even gas tax and other excise taxes.
How to appeal a tax return?
Appeals may be made by a letter request to OTA, accompanied by any supporting documents. You can ask for an oral hearing, which is usually a good idea. You can even bring witnesses who can testify before the OTA. Prior to the hearing, taxpayers should provide all relevant documents to OTA and may ask, or be asked, to participate in a pre-hearing conference. Each tax appeal is heard by a panel of three administrative law judges (ALJs), each of whom has significant experience with tax law.
How long does it take to get an ALJ decision?
Generally, the ALJ panel will prepare a written decision within 100 days of the hearing, along with information about further steps that may be taken if the taxpayer disagrees with the OTA's decision.
Can California piggyback on IRS?
Unfortunately, no matter how long your IRS dispute goes on, California can always piggyback and collect its share. Several things can give the FTB an unlimited amount of time. California, like the IRS, gets unlimited time to come after you if you never file an income tax return. The same goes for false or fraudulent returns. Those are obvious, but there are other dangers, too. In some other, less intuitive cases, California also gets unlimited time to audit. Suppose that an IRS audit changes your tax liability. Perhaps you lose your IRS case, or you just agree with the IRS during an audit that you owe a few more dollars. You might simply sign and send back a form to the IRS. In that event, you are obligated to notify the California FTB within six months. If you fail to notify the FTB of the IRS change to your tax liability, the California statute of limitations never runs. That means you might get a tax bill 10 or more years later.
Does California have a FTB?
Yes, it happens. California’s FTB often comes along promptly after the IRS to ask for its piece of a deficiency. But regardless of whether California gets notice of the adjustment from the IRS, California taxpayers must notify the FTB and pay up. If you forget, they usually find you at some point. This coattails concept in California law applies to amended tax returns as well. If you amend your IRS tax return, California law requires you to amend your California return within six months if the change increases the amount of tax due. If you don’t, the California statute of limitations never expires.
Understanding income tax vs corporate franchise tax
Understanding the tax system and the tax responsibilities of the citizen to the federal and state government as it concerns the location of business operations is an essential duty of every business owner. Ignorance is not an excuse and therefore there are penalties and punishments for irresponsible tax behavior.
Corporate Income Tax
Income tax usually applies to the net profit of the business entity because it is usually calculated based on the corporation’s net profit for the year. Consequently, if no Profit is made for the year, no income tax will be required.
Franchise Tax
A franchise tax is a government tax/levy charged annually by some states to certain business organizations for the right to legally do business within that state. When a business organization refuses to pay franchise taxes, it can result in becoming disqualified from incorporating or doing business in that state.
What is the difference between FTB and IRS?
Another major difference between IRS and FTB audits is that California FTB audits tend to be more “theme-based” than IRS audits and the FTB will often select taxpayers for audits based on certain transactions that the FTB has been investigating. For instance, the FTB has recently and frequently audited taxpayers who have executed 1031 like-kind exchanges, taxpayers reported losses from flow-through entities such as S-corporation, partnership, and LLCs, and also capital gain and loss transactions.
What is the California Franchise Tax Board?
The California Franchise Tax Board (FTB) is the agency responsible for enforcing the income tax laws of California. The California Franchise Tax Board is notorious as one of the most aggressive taxing agencies in the State of California. Because income taxes are a significant driver of revenues to the State of California, the FTB aggressively pursues is audit and collection efforts in order to maximize revenue to the state.
What happens if you are listed on the Top 500?
The impact of being listed on the Top 500 list is that in addition to pursuing normal collection activities such as file liens, issue wage garnishments and bank levies, and seize assets, the Franchise Tax Board may suspend a taxpayer’s driver’s license and his/her occupational and professional license. Furthermore, if the taxpayer conducts business with the State of California, such a government contractor, State agencies will discontinue doing business with the taxpayer.
Can the DMV suspend your license?
Also, under California law, the DMV has the ability to suspend your driver’s license for failure to pay California income tax under some circumstances.