Dealing with Tax collections (CA FTB)

[Anonymous]

I have a dreaded phone call with the CA Franchise Tax Board collections tomorrow.  Every time I'm on the phone with them it seems my life is ruined.  I'm kind of freaking out here.

Here's my situation.  I owe $40k + a huge debt to the IRS.  I am now on a payment plan with the IRS.  I have been diligently paying down credit card debt.  The tax agencies don't recognize revolving debt when they calculate how much you have to pay them.  It makes things tough.

The last time I talked with the CA FTB, they siezed my rent money.  I struggled for a while, and eventually had no choice but to quit my job so that my earned vacation could be cashed out and so that I could access my 401k.  When I quit, the FTB gave me a few months of freedom - they had been garnishing my wages.

I got a new job.  It came with a signing bonus and relocation.  I used the money I had access to to pay down ~$50k in revolving debt and am almost clear.  Down to $5k in my name, $7k in my wife's, and $10k in my wifes student loans. 

I would have prioritized tax debt, but the interest on the revolving was double (maxed out penalties on the tax debt), and even if I made the CA tax debt go away, I had the same problem with the IRS in that they don't give me the ability to pay down credit cards and I'm left scrambling to find a second job to stay afloat.  Until my second job income reports, at which point I have to stop and float myself until I get re-evaluated and it's this never-ending cycle of pain.  I looked into bankruptcy again, and my revolving debt was higher priority than the tax debt for them, so that helped me personally justify this decision as well.

So here I am.  Afraid of the phone call.  I got a letter, I called, the guy is on vacation until tomorrow.

I have a plan.  I will pay $1000/month and when vesting happens I can get this down to $25k at which point I will be able to qualify for an auto-approved payment plan.  The $1k/month will have to come from a second job which I don't have yet, as my current budget is maxed.  I'm comfortable that I can do this immediately, but doing it ahead of this call will screw me (it has before).  I cannot legally promise my vesting stock.  I have been warned by our company's legal team that this amounts to insider trading.

I have worries.  My rent is above the IRS standard.  I can justify that because my employer dictated a region to live (within x miles of the home office), because there are and were no places available within the standard, and because my credit and rent problem disqualified me from many potential homes (I had actually posted in here worried about my score and renting a few months back). 

My other expenses that qualify as allowed like groceries, child care, clothing, car maintenance fluctuate and while I'm sure they meet the standard for the year, they have been scrutinizing every debit and check on my bank statements and the last several months I've been minimizing everything to pay down revolving debt so that I can get into a situation where I can work on the tax debt and sleep at night.

Last night, I looked into the laws.  CA specifically allows you to sue if they give you bad advice in writing.  That means you can't sue if they say they need something over the phone, you provide it to them, and it causes damage. 

That makes it sound like I should communicate with them only in writing.  Unfortunately, the state won't actually set up a payment plan unless you call.

I feel like I'm going to screw myself somehow.  Like they are going to ask who my new employer is, then boom, garnished and I look bad at the new job.  And if I don't answer, no possibility of a payment plan.  I don't know what's actually required.  I don't know how to push it to writing.  I don't know if I can use IRS standards for my expenses or if I have to actually show receipts for everything.  I don't know if I'm actually required to hand over my bank statements and my pay stubs.  I don't know what reasonable deadlines actually are.  (in the past, I've gotten a lot of... "we need your paystubs by tomorrow, or else we'll garnish you" or "we need your bank statements by end of day" which makes me lose time at work and seems to increase the speed at which they can do me harm).

I hired a lawyer at one point who did not help at all.  He sat on the phone, itemized everything they asked for, promised everything immediately, and charged me.  It was like paying lawyer fees for getting a bad transcription.

What can I do and where can I go for real help with the CA franchise tax board?  I am not trying to avoid paying.  I want a plan for paying that will be successful.  I want the stress from this to go away.

[Anonymous]

For the next person to review this post hoping to find some good information about dealing with CA FTB collections:

There are a lot of tax debt firms out there.  The ones that I've talked to over the years charged huge sums of money and from what I can tell, don't offer you much other than taking the negotiations out of your hands.  If you can afford them, chances are that you aren't going to get a settlement offer accepted.

The public collection procedures are here:  https://www.ftb.ca.gov/aboutFTB/manuals/arm/cpm/index.shtml

You will notice that there are missing pieces in those procedures.  Those missing pieces can be found if you search for them.  When you see reference to a missing section, it includes the title of that section.  Search for that title with varying phrases pairing the term with the FTB and you'll find it, or at least an old copy of it.

The procedures were enlightening to me.  If only I found them years ago.  I did find, like I suspected, that the procedures for due process in my case were not followed.  It is important that you pay careful attention to all of the letters you are sent, and that you call attention to all of the dates, account numbers, and other data.  Save the envelope so you have the actual post-date.  (i.e. currently I have a letter with a "Notice Date" of 11/30, a Pay Date of 12/15, a note that the pay date is 12/30, and a post-date of 12/3 (which invalidates all of the other dates in the letter).  Also, be aware that just about any decision they make can be appealed, and they have procedures to notify you that you can, and to provide instructions as to how.

My hopes of shifting over to a payment plan from a garnishment have been dashed.  There are limited circumstances that allow that to happen, and although I _feel_ that my due process was violated, I don't have high hopes that I would be successful in challenging the garnishment at this point, and if I were, the time and effort vs. the benefit at this point is not a good bargain.

I have shifted my plans for the conversation.  I'm hoping to appeal to the agent's better nature to buy myself a short period of time so that I can obtain a loan to pay the tax bill in full.  I should be able to pay off my credit debt by the end of the month, and it will take until next month for the scores to reflect it.  If I can delay garnishment until February, I think that I will qualify for a loan to cover the debt before that happens.

It puts me in the position where the IRS will balk when it comes to determining how much I can pay them when I am next under financial review.  Whereas if I had a payment plan with the state, it would be an allowed debt.  I feel strongly that a garnishment would affect my employment.  I wouldn't get fired, but I would be in a bad position with bonuses/advancement.

I am concerned that the letter does not present the full picture.  That there is more debt that is not itemized.  If that's the case, I may have to file for BK again to save my job and ability to pay these things off.  My worst nightmare at this point.  My SO assures me that all other years have been paid.  The problem is that at no point, no matter how hard I try and how much searching I do, have I found the very basic ability to see how much I owe and what the associated timelines are.  Tax collectors like you to be in a position where you are overwhelmed and they can strategize to extend their timeframe to collect.  (we spent 7 years collecting on 2010, now that that's over, we're starting collecting on 2011 - whereas if you were partial paying 2010 and 2011 simultaneously they would both be off the books)

Anywho...  two big long posts that consist of me ranting about how screwed I am and that I put myself in a terrible financial position.  They probably both sound like they were written by someone stressed out of his mind on very little sleep.  They were.   

I'm hoping it at least makes enough sense that the next person who gets stuck like me knows someone else has gone through it.

[Anonymous]

And one more update.

I got in touch with them.  They seem to be agreeable to a payment plan that puts me into a 3 year payoff.  I need to submit financials.

If they do not garnish my wages, I am willing to take on additional work to get this off my back.  The plan is to pay it off in 2019, but committing to the monthly payments in 1 year doesn't work as I am counting on bonuses and options.  Additional work that can fit within my current jobs' employment parameters can fill the budget deficit.

It's been 2 1/2 years of collections hell getting to this point and it was one day away from putting me into a second bankruptcy.  (We were about to file when my current job's offer came in).

My fingers are crossed. 

Once I get this monkey off my back I'll be down to the IRS, my SOs cards, and my SOs student loans.  The cards and student loans seem tiny at this point (total $20k).  College is around the corner, and then paying back family from the months leading to my BK in 2013.  I'm several years out from being debt free, and there's always the unexpected, but I'm making enormous progress.  I might cause a heart attack when I pay back my family.  (They long since forgave the debt, in the interest of my kids, but I haven't forgotten)

[sjt]

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@Anonymous wrote:

And one more update.

I got in touch with them.  They seem to be agreeable to a payment plan that puts me into a 3 year payoff.  I need to submit financials.

If they do not garnish my wages, I am willing to take on additional work to get this off my back.  The plan is to pay it off in 2019, but committing to the monthly payments in 1 year doesn't work as I am counting on bonuses and options.  Additional work that can fit within my current jobs' employment parameters can fill the budget deficit.

It's been 2 1/2 years of collections hell getting to this point and it was one day away from putting me into a second bankruptcy.  (We were about to file when my current job's offer came in).

My fingers are crossed. 

Once I get this monkey off my back I'll be down to the IRS, my SOs cards, and my SOs student loans.  The cards and student loans seem tiny at this point (total $20k).  College is around the corner, and then paying back family from the months leading to my BK in 2013.  I'm several years out from being debt free, and there's always the unexpected, but I'm making enormous progress.  I might cause a heart attack when I pay back my family.  (They long since forgave the debt, in the interest of my kids, but I haven't forgotten)

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Congrats. 

Keep us posted.

[sjt]

Did you file Fed and State tax returns or did the Fed/State file on your behalf. If the latter, you might want to amend those returns. Chances are you would owe less. Also, have you asked Fed/State to waive some of the penalties or looked into an OIC.

[Anonymous]

I filed them late.  At the time, I didn't have access to my files as I had just moved.  I was getting pressure from the FTB to hurry up and file tham.   I filed with zero business expenses thinking that I was going to negotiate anyways because the number was so large.  Turns out all you here about tax debt negotiation is BS - if you are young enough, they will not negotiate.

I've considered ammending the returns since, but it comes with the penalty of resetting the statute of limitations.  Not so much of a big deal with the FTB (CA has 20 years), but it makes a difference with the IRS.  Although in the end, the IRS will more than likely get payment in full as well.  I don't know how many years they have left and I don't know how to find out.  I've been making payments for a few years with intermittent hardship status, but the more I read the more I think their 7 year limit is a pipe dream.

[gdale6]

CA is my home state. Having dealt with these vultures and other vultures of the state in regards to being self employed I chose to leave the state. I do not regret my choice at all in fact I was never bothered by the state government that I moved to once Outside of CA their enforcment actions are quite limited. I would not even set up a plan and just send them the 1K a month and not from your personal check either but a cashiers check from a bank you do not bank at.