State Of California Ftb Lien

Having unresolved tax debt with the State of California Franchise Tax Board (FTB)

makes you vulnerable for enforced collection activity that might be initiated by the State. This includes bank and wage levies, seizure of property, and tax liens. The State of CA FTB is allowed to file tax liens according to the Government Code Section 7170-7173 in order to protect the States right to collect delinquent taxes.

If the FTB files a tax lien, it will most likely affect your credit history. This means you might have difficulties applying for a credit card, obtaining a loan for a vehicle, getting a mortgage, or refinancing your house. A lien is not easy to remove. The best way to release it is to full pay your state tax liability, including penalties and interest accrued on top of the tax due portion. However, it usually takes at least 40 days for the State of CA FTB to record a certificate of release of a lien with the office where this lien was initially filed, and to notify credit reporting companies. If a payment is made by check, the 40 days period starts from the moment when the payment was honored by the bank.

In some situations it is possible to remove or subordinate an FTB tax lien without paying the tax debt in full. This might happen when a taxpayer needs to sell or refinance a home with a lien attached to this property. When a house is being sold for the amount less than its loan balance, the FTB can withdraw the lien to allow a taxpayer to sell the property. Those who experience financial hardship and try to sell their home as quickly as possible might be able to have the lien removed within two weeks, after filing all necessary documents with the State.

It is also possible for a taxpayer to request that the FTB subordinates its tax lien in order to refinance a house. In this case the State FTB lien becomes secondary to the lien of the lending institution. The State does not agree to remove a lien just as a favor to those who owe back taxes. The idea behind this is to increase the collecting potential of a taxpayer. If a real property is sold with a profit, the State would release a lien on the condition that this profit will be applied to the tax liability.

It is important to understand that entering into a payment plan or an Offer in Compromise with the State of CA FTB does not release a state tax lien until the debt is paid in full. In addition, even if a lien is removed from one property, it does not automatically disappear from other properties that a taxpayer has.

Although it is easier to avoid any tax problems with the FTB than to deal with them, in most cases it is still possible to resolve the situation. However, due to the complexity of the State tax codes, hiring a tax professional to help you with your Franchise Tax Board tax liability might be a smart solution, especially in a situation when you need a state tax lien to be removed.

by: Ian L. Jackson

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