Ask the Advocate – Installment Agreements: Information Your Client Needs
If your client is unable to pay their full balance due, they may be eligible to make installment payments over time. If your client is eligible, we recommend they make the largest monthly payment possible because their tax liability will continue to accrue interest and possibly even penalties until it is fully paid.
To be eligible for an installment agreement your client needs to meet a few conditions:
- Their tax liability cannot exceed $25,000.
- The installment period for your client’s payments must be within 60 months (5 years).
- Your client filed all required valid personal income tax returns.
- Your client does not have an existing installment agreement.
- Your client currently does not have any type of withholding orders against them.
- If your client’s tax liability is greater than $10,000, or the installment agreement period exceeds 36 months (3 years), or both, then your client must certify that they have a financial hardship.
If your client meets all the conditions and you believe they are eligible for an installment agreement then you may request one. When you request an installment agreement, your client agrees to meet all future tax liabilities. Your client must file future tax returns timely and have enough withholding or estimated tax payments to pay their tax liability in full for future years. We approve or reject the request based on your client’s ability to pay and their compliance history. We may file a lien and/or request a financial statement as a condition for approval.
What your Client Should Know if Approved for an Installment Agreement
- Payment will be automatically deducted from their bank account. Therefore, they must keep adequate funds in their bank account to maintain timely monthly payments.
- Additional interest and some penalties continue to accrue while they make their scheduled payments.
- You client agrees to pay a $34 installment agreement fee. We add the fee to the balance due.
- We keep any state tax refund your client is due and deduct it from the total amount they owe, but the refund amount will not replace their monthly payment.
- Your client will be in default on their agreement, if they do not make timely payments on time or if they have an outstanding past due amount in a future year. We may take enforcement actions to collect the entire amount they owe.
We offer three different ways to request an installment agreement:
- Online. Go to ftb.ca.gov and search for installment agreement
- Phone. Call 800.689.4776
- Mail. Mail to us a completed FTB Form 3567, Installment Agreement Request, and FTB form 4023, Electronic Funds Transfer (EFT) Authorization. Make sure all information is complete or it will delay the process of your request.
For additional information on installment agreements, go to ftb.ca.gov.
Steve Sims, EA
Taxpayers' Rights Advocate
Follow me on Twitter at twitter.com/FTBAdvocate.