Paying back taxes is a stress-inducing enough factor. However, to be indebted to the state of California as well as the federal government may sometimes be like being sandwiched between two hooves.

Although the Franchise Tax Board (FTB) and the IRS are interested in the same goal of collecting them, their ways, choices, and timeframes differ significantly. The first step on how to develop a successful relief strategy is understanding this duality. Always look for an expert (like an IRS audit attorney in San Diego) whenever you are in trouble.

Understand the Mindset of the IRS and FTB

The nearest dissimilarity is the manner in which they chase you.

1.     IRS

The federal collection procedure is procedural and is subject to stringent internal regulations and a 10-year Collection Statute of Limitations. They will resort to liens and levies, and frequently in the wake of a formal series of notices.

2.    FTB

The FTB of California is generally viewed as more aggressive as well as fast-acting. Their collection period is much longer, and they can move fast to:

Bank Levies: Sometimes, without much notice, freezing of your accounts are frozen.

Wage Garnishments: Making direct contact with your employer.

Suspension of Driver's License: An effective state-based enforcement measure.

The position is aggressive, and that is why FTB debt is an urgent issue.

Check on the Basis of the Offer in Compromise

The two agencies have an Offer in Compromise (OIC); however, their eligibility requirements are the polar opposite. This is the most crucial distinction to people who are seeking a new beginning.

Main Pillars of OIC by IRS

The IRS OIC is anchored on three pillars:

1.     Doubt as to Collectability

You are unable to make the entire debt today or within the foreseeable future.

2.     Uncertainty of Debt

You have evidence that you do not owe the debt.

3.     Effective Tax Administration

It is not fair, nor would it put a strain on the economy, to pay the debt.

What about FTB OIC?

To be eligible, you have to pass one of two tough tests:

a)     The Doubt as to Collectability Test

Like the IRS, only the calculation by FTB of your reasonable potential to collect can be restricted.

b)     The Severe Economic Hardship Test

It is the first avenue for most. You will have to demonstrate that you will suffer hardship by paying the tax, such that you are unable to afford basic needs that sustain you and your family.

More importantly, the FTB will automatically dismiss your offer in the event that you have some arrearage of child or spousal support, or can afford to pay your debt off in full by installment agreement. Hiring an experienced tax professional (like a tax lawyer in Los Angeles) is essential when you are dealing with complex tax matters.

Understand the Popular Relief Options

Other distinctive mechanisms of FTB are beyond the scope of OIC:

1.     Currently Not Collectible (CNC) Status

In the event that you can establish that payment of any type would result in your inability to cover basic living expenses, both the IRS and FTB may make CNC, and collections are suspended at least temporarily. This is one of the major defensive strategies against their aggressive strategies using the FTB.

2.     Installment Agreements

Both agencies provide payment agreements, but the FTB can demand a financial disclosure on larger debts and can be stricter with conditions. Debt management strategies that can be employed to handle dual debt.

3.     Balance Other Priorities

When you have an FTB to consider, since they are fast and have strong collection methods, it is easy to give their debt to the state tax a priority first. FTB bank tax can lead to an immediate financial crisis.

Being confronted by the FTB and the IRS at the same time is not an easy task to handle, but it is not impossible. Knowing their various rules and the use of state-specific relief options, you will be able to establish a defense that will safeguard your assets and will lead the way to financial recovery.