Ask The California Employment Tax And Payroll Tax Attorney – FTB’s New Rules For Installment Agreements

By Robert S. Schriebman

2023

Introduction

When you owe the California Franchise Tax Board (FTB) you essentially have the following options:

• Pay in full if you have the ability to do so.
• Installment payment agreement
• Hardship suspension (interest continues accrue during suspension)
• Offer in Compromise

This article will discuss the new FTB rules for granting an installment payment agreement commencing January 1, 2024.

New Rules for Installment Payment Agreement

Beginning in 2024, the FTB MUST enter into an installment payment agreement to pay delinquent personal income taxes if the taxpayer owes $25,000 or less.  Currently an agreement must be given if the taxpayer owes $10,000 or less.

How long will the new agreement be?  The current maximum time limit for payment arrangements is 3 years.  In 2024, the maximum payment period will be 5 years.  If the taxpayer fails to pay any tax during the 5-year look-back period, that failure will not terminate the new agreement.

The FTB will have the authority to alter, modify, or terminate the new agreement if any of the following occur:

• Providing any accurate, incomplete or fraudulent information
• Determines that collection of the balance is in jeopardy.
• The financial condition of the taxpayer has improved for the better.
• Failure to make a timely installment payment.
• Failure to file a future return and/or pay the tax.
• Failure to provide updated financial information upon the FTB’s request.

The FTB will not be allowed to alter, modify or terminate a new agreement unless any of the following occur:

• The FTB must give the taxpayer at least 30 days notice in advance, and
• The FTB must explain why it is seeking to alter, modify or terminate the agreement.

The above two rules will not apply, and the FTB may terminate or modify the agreement at will, if the FTB believes the collection of the tax is in jeopardy.

Conclusion

These new rules are not for everyone.  They are aimed at primarily small tax debts of $25,000 or less.  Those owing the FTB more than $25,000 will be governed under current collection guidelines.

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 Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.  Mr. Schriebman is in private practice.  He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books, including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners,” published by Commerce Clearing House.

Robert Schriebman has written over 20 books, including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners,” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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