Who is eligible to pay back taxes to the California Franchise Tax Board via an installment agreement? It can be a little complicated.
It’s difficult not to compare FTB and IRS collection tactics. Both almost always first demand/request payment in full. The collection notices are worded in a way that if you don’t read beyond the first sentence, it will appear that full payment is your only option. And when you call them up, that’s the first thing out of their mouth. IRS will usually say “Do you have the ability to pay your tax bill in full?” If you cannot write them a check, then the discussion typically shifts to what is required for an installment agreement. However, the FTB will often (at least at first) demand full payment without regard for your ability to pay and then very reluctantly tiptoe around the option of paying back your taxes in installments.
The eligibility requirements for an FTB installment agreement are more stringent than the IRS requirements. First and foremost, it is very difficult to obtain an installment agreement with FTB if you have an active earnings withholding order (EWO). An EWO is just another word for “wage garnishment” or “wage levy.” Once the FTB has brandished this collection tool, and they have a steady stream of payments coming in, it is very difficult to convince them that they should trade these “guaranteed” payments for a promise to pay from the taxpayer.
Like the IRS, the FTB does require that all back tax returns have been filed so there is no question as to how much is owed. Also, like the IRS, FTB requires that the entire tax debt be paid off within a specified time frame. They give as much as 60 months for some tax debts, but only 36 months for others. The IRS will allow a full 72 months for tax debts under $50,000.
Both FTB and IRS recognize certain events that will cause an installment agreement to default. Some of these events include (a) failure to make timely payments, (b) failure to timely file a future tax return, and (c) incurring a new tax debt.
Whether you owe FTB or IRS (or both) it would be a mistake to think that you can always just request an installment agreement to avoid enforced collection action. It’s not always that simple.