California Board of Equalization (BOE) tax help

The Board of Equalization administers several areas of taxes: sales and use taxes, property taxes, special taxes and the tax appellate program.

Information unique to the California BOE.

• Liens
• Offer in Compromise
• Payment Plans (on back taxes owed)
• Power of Attorney
• Warrants and Levies

Tax Liens and the California BOE

A tax lien is a legal claim against real or personal property to secure a debt. If you have a delinquent tax balance, the BOE may record a lien to secure the tax debt.

The lien encumbers your California property, preventing you from refinancing, selling, or transferring it through escrow. In addition, credit bureaus monitor public records for recorded liens. If the BOE records a lien against you, they have secured a legal right to enforce collections, which may include bank levies and other asset seizures.

Offer in Compromise with the California BOE

An Offer in Compromise (OIC) is a proposal made by the taxpayer to the BOE to pay less than the amount due to settle liabilities that cannot be paid in full. In order to participate in the BOE Offer in Compromise program, the following conditions must be satisfied:

• The liability to compromise must be a final liability and not in dispute.
• The tax account must be closed and the taxpayer must not be involved in the operation of the same business or same type of business that generated the tax or fee liability that is proposed to be compromised.
• The taxpayer does not have the means to pay the liability in full within a reasonable period of time, in most cases between five and seven years.

Fraud

Offers for liabilities with a fraud penalty will require a minimum offer of the tax and fraud penalty. The minimum offer can be waived if it can be shown that the taxpayer making the offer was not the person responsible for perpetrating the fraud. This situation applies to partnership accounts where the intent to commit fraud can be clearly attributed to another partner.

Offers will not be considered in situations where the taxpayer has been convicted of criminal fraud for fraudulent behavior during the audit period.

Payment Plans or Installment Agreements

Short Term Payment Proposal with the California BOE

Short term payment proposals may be considered. If a taxpayer’s payment history is unsatisfactory, an exception may be granted at the discretion of the district. Short-term payment plans generally do not exceed twelve months in length. Payment are generally made on a weekly basis. Current tax returns and prepayments must be filed and paid timely as a condition of the payment plan.

If a short-term payment proposal exceeds two months on an active account, the taxpayer may be required to make weekly or monthly payments against the anticipated return for the upcoming period.

Termination Installment Payment Agreements

Installment agreements may be terminated due to late installment payments, delinquent or partial payments, or failure to disclose assets or income on a financial statement. Other reasons for termination could include a failure to increase payment levels as requested based on new assets or income, or a failure to comply with a review of financial status.

Long Term Payment Plan with the California BOE

Long term payment plans are generally for a period of twelve months or longer. Before accepting any proposal, the financial condition of the tax debtor will be thoroughly investigated. This will involve a complete financial statement and a formal request for an installment agreement. If a tax debtor has cash equal to the tax liability, immediate payment will be demanded. If there are assets with value and a tax debtor is unwilling to raise money from them, enforcement action may be taken by the state.

Allowable Expenses — Long Term Payment Plans

Allowable expenses: There are two types of allowable expenses — necessary and conditional.

Necessary expenses must meet the necessary expense test. The necessary expense test is a general rule that states that the expense must provide for a tax debtor's and his or her family's health, welfare or production of income. In some situations, the BOE representatives will make a judgment call to determine if the expense qualifies as necessary. The expenses must be reasonable in amount. The total necessary expenses establish the minimum a tax debtor (and family) needs to live.

Types of necessary expenses

1. Standards for food, housekeeping supplies, apparel and services, and personal care products and services have been originally developed by the Internal Revenue Service based on the Federal Bureau of Labor Statistics, Consumer Expenditure Survey 1994–95, and adjusted for inflation to the year 1996. The standards have been stratified by income level. As income levels increase, the percentage of income provided for these expenses decreases. The standard level for miscellaneous expenses was developed by the BOE.
2. Other expenses may be allowed if they meet the necessary expense test. They must also be reasonable in amount. Since there are no statewide or locally established standards for determining reasonable amounts, the BOE will determine whether the expense is necessary and the amount is reasonable. A common example is child/dependent care.

Conditional expenses.

These expenses do not meet the necessary expense test. However, they are allowable if the tax liability, including projected interest and penalty accruals, can be paid in full within three years.

1. Three year rule. This rule establishes a time limit. For substantiated conditional and excessive necessary expenses to be allowed, the tax liability, including projected interest and penalty accruals, must be fully paid within three years.
2. One year rule. This rule establishes a time limit. It provides the tax debtor up to one year to modify or eliminate excessive necessary or not-allowable conditional expenses if the tax liability, including projected interest and penalty accruals, cannot be fully paid within three years. This period can be adjusted from one to twelve months based on the nature of the expense.
3. Ninety day rule. Payments on unsecured debts will not be allowed if omitting them would permit the tax debtor to pay in full within 90 days. Minimum payments may be allowed on credit cards to preserve a tax debtor’s credit rating.
4. Reasonable amount. For certain specified expenses, the reasonable amounts are provided by the statewide standards and the local standards. If the expense falls under other necessary or conditional expenses, the BOE employee responsible for the case will determine what amount is reasonable from any information available (e.g., comparable costs for child/dependent care for the region). If the tax liability, including projected interest and penalty accruals, can be fully paid within three years, the BOE will allow a tax debtor's claimed expenses if the expenses fall within the statewide standard limits, or if the tax debtor substantiates each expense.
5. Disposable income. This is the amount of income that remains after allowable expenses are deducted from gross income, including deductions required by tax code to be withheld, or any child support or alimony payments that are made under a court order or legally enforceable written agreement. Amounts required by tax code to be withheld include, but are not limited to, federal and state taxes, FICA contributions, Medicare contributions, and wage garnishment payments. Disposable income is the amount available to apply to the tax liability.

Power of Attorney with California

You may have a qualified professional represent you. This requires that you have a power of attorney form completed and signed before any tax matter can be discussed with your representative. The state of California accepts the BOE-392 Power of Attorney for this purpose.

Below are links to California's other two taxing authorities:

• Franchise Tax Board handles individual income and corporate taxes.
• Employment Development Department handles withholding taxes.

Warrants and Levies

The BOE may issue warrants for enforcement of liens and collection of amounts due. A Notice of Levy, rather than a warrant, will be used to levy on money, or right to money, held or controlled by the tax debtor or by a third party.

Levies pursuant to warrants, with the exception of wage levies, are made by sheriffs, marshals, constables or California Highway Patrol. Upon receipt of the warrant, the officer is required to promptly serve the levy and take possession of the available assets according to the instructions that accompany the warrant.

If the asset consists of money, the person served is required to turn the money over to the officer who will turn the money over to the BOE for the credit of the taxpayer’s account after deducting fees, expenses and commissions. If the asset is other than money, the officer will take possession and arrange for sale to the highest bidder at public auction.

We strive to save our clients money, time and stress.  Just as there are many different tax related problems, there are many options for tax resolution.  Call us at 888-902-0778 for a free consultation. In a few minutes we will help you to better assess what options are best for your unique situation.