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Installment agreements for state taxes in CA: Who is eligible?

Sometimes paying your full tax bill isn't possible all at once.

That is why one of the options the IRS allows for resolving federal tax liability is an installment agreement. We discussed this is our August 19 post.

In today's post, let's look at the comparable procedure at the state level. What are the eligibility requirements for an installment agreement in California?

Under an installment agreement (IA), you can make monthly payments on your taxes when you are unable to pay the full amount when it is due.

The California Franchise Tax Board (CFTB) cautions that even if an IA is accepted, interest will continue to accrue on your taxes until full payment is made. The same is true of any applicable penalties. And an IA does not prevent the CFTB from imposing a tax lien.

You should also not expect to get any tax refunds until full payment is made. The CFTB will retain any state refund you get during the installment agreement period. The CFTB could also go after your federal refund through the Federal Treasury Offset Program.

Nonetheless, an installment agreement can allow you to get a plan in place to pay off your tax debt as soon as your finances allow. Whether you should use the procedure is a question you can discuss with your tax attorney.

There are, however, certain income and time limitations for an IA in California. If your tax liability is more than $25,000, you will not be eligible for the California IA program. California also does not allow the payment period to go beyond five years, and you must have filed all required returns for your individual taxes.

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