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 Clients in collection status? Some resources that can help

The mortgage foreclosure situation, tightening credit, and the high cost of gas are having a grim financial effect on many Californians. Tough economic times are often accompanied by an increase in collections cases, as taxpayers find themselves with higher bills and fewer resources. If you have clients who are in collection status, wondering what they should do, here are some online resources that can help.

Glossary of collection terms

Start with our glossary of tax and collection-related terms. This is the place to find official FTB definitions of terms like “interagency intercept,” “COTW” (Continuous Order to Withhold), etc.

PIT collections information

The publication Personal Income Tax Collections Information (FTB 1140) is a short guide to taxpayers’ rights regarding collection actions related to liens, penalties, fees, interest rates, collection action alternatives, claims for refund, and more.

Collection Notices

Did your client receive a Notice of Tax Change, or maybe an Earnings Withholding Order? Refer them to our Bills and Notices webpage for a list of commonly issued notices, what they mean, and how to respond to them. 

When your client can’t pay

Our first choice is to find a way to work with taxpayers in collection status. Resolving collection issues sooner than later benefits all involved parties. The taxpayer avoids penalties and interest, the employer avoids extra work, and the state saves money otherwise spent on collection activities. If you have clients who receive collection notices and can’t pay, encourage them to contact us about setting up a payment arrangement. Find information on our website by searching for installment agreement, or call 800.689.4776. Monday through Friday between the hours of 7:30 a.m. and 6 p.m.  

Earnings Withholding Orders for Taxes

Earnings Withholding Orders for Taxes (EWOTs) affect both employees and employers. You may be familiar with EWOTs from both perspectives. If your client is receiving collection notices, and is an employee who earns wages or a salary, we will likely contact his or her employer to establish an EWOT if we are unable to resolve the tax debt another way. Although we prefer to work with the taxpayer to resolve taxes owed before getting to this point, when that doesn’t work we will turn to EWOTs. The EWOT directs the taxpayer’s employer to withhold a certain amount of the taxpayer’s wages or salary each pay period, and transmit the amount to FTB to resolve the tax debt.

Answers to questions about EWOTs, from the perspective of both employees and employers, are found on these webpages:

  • Earnings Withholding Orders for Taxes (EWOTs) – Employer Information. Scroll down to the bottom of the webpage for information and answers to employee EWOT questions.
  • EWOT Withholding Calculator has instructions for both employers and employees, on how to correctly calculate the amount that should be withheld from employees’ paychecks.

Power of Attorney

To discuss your clients' accounts with you, we must have evidence of your authorization to act on behalf of your clients. This evidence can be established by our having a Power of Attorney (POA) on file for you . For quick answers to general POA questions, and to download POA forms, you can refer to our POA website. You will find answers to questions about why and when POAs are needed, how to set them up, how long they remain in effect, what forms to use, and more.

When filing a POA, there are numerous options for which form to use, including:

  • FTB POA Form 3520.
  • We also accept the IRS’ Power of Attorney (Form 2848), and the IRS Tax Information Authorization (Form 8821), with certain provisions.
  • Very often, when you need a POA to discuss your clients’ accounts with us, you also need POAs with the IRS, the California Board of Equalization (BOE), and the Employment Development Department (EDD). You can use BOE Form 392, which is a joint authorization form. If your client has issues to discuss with FTB, BOE, and EDD, or any combination of the three agencies, this one form takes care of all three.

You can find links to all of these forms on our POA – Forms and Publications webpage.

FTB maintains a database (the POA File) that tracks each POA on file for each taxpayer, including the representative(s) authorized to discuss the taxpayer’s account with FTB, and the tax years or income periods covered by the POA. The POA File ensures that only authorized representatives receive information about taxpayers. It also means that FTB employees can immediately establish whether a caller has POA authorization. If we have proof of a POA in our file for your client, we can discuss your client with you when you call, with no waiting.

Innocent Spouse

Under some specific circumstances, your client may qualify for innocent spouse relief. Check our FAQs, and our eligibility brochure for answers to your innocent spouse questions.

More

After checking out the sources above, if you haven’t found what you and your client are looking for, go to the source: the Collections Procedures Manual. Go to our website at ftb.ca.gov and search for “CPM.”