Tax issues in California can quickly become overwhelming. Between the IRS, the California Franchise Tax Board (FTB), the Employment Development Department (EDD), and the California Department of Tax and Fee Administration (CDTFA), taxpayers often feel trapped and unsure of their rights or options.
This FAQ article addresses the most common California tax problems—from unpaid back taxes and tax liens to bank levies and complicated residency disputes. We’ll also explain how Mike Habib, EA, a nationally recognized and BBB A+ rated Enrolled Agent, can represent you before the IRS and California taxing agencies to help resolve your tax matters effectively.
CA Tax Frequently Asked Questions (FAQ)
- What are the most common tax problems California residents face?
California taxpayers frequently encounter:
- Unpaid back taxes (federal or state)
- Tax liens filed against property or assets
- Bank levies or wage garnishments
- Residency disputes with the California FTB
- Payroll and employment tax problems (EDD)
- Sales and use tax audits (CDTFA)
- Penalties and interest adding up over time
These problems often compound if ignored. Professional representation helps taxpayers protect their assets and negotiate the best possible outcome.
- What happens if I have unpaid taxes in California?
If you owe IRS or California state taxes, both agencies can take aggressive collection action, including:
- Filing a tax lien against your property
- Seizing funds through a bank levy
- Taking a portion of your paycheck through wage garnishment
- Offsetting your state or federal tax refunds
In addition, California agencies like the FTB and EDD have broader powers than the IRS, including suspending your driver’s license or professional licenses until the balance is paid.
- How serious is a tax lien in California?
A tax lien is a legal claim against your property for unpaid taxes. Once filed, it:
- Becomes public record, damaging your credit rating
- Impacts your ability to refinance, sell, or borrow against property
- Gives the IRS or FTB priority claim on your assets over most other creditors
Tax liens should be addressed quickly to avoid escalation into property seizure.
- What is a tax levy and how does it affect me?
A tax levy is when the IRS or California taxing agencies legally seize your property or money to satisfy a tax debt. Common levies include:
- Bank account levies (freezing and withdrawing funds)
- Wage garnishment (deducting from paychecks)
- Seizure of physical assets (cars, homes, business equipment)
Levies can devastate your financial stability. A tax professional can often stop or release a levy by negotiating with the agency.
- What is a California residency dispute?
California residency disputes occur when the Franchise Tax Board (FTB) challenges whether you are a resident for tax purposes. The FTB presumes you owe California income tax if you:
- Spend significant time in California
- Maintain a home, bank accounts, or driver’s license in California
- Have family or business ties in the state
Even if you move out of state, the FTB may argue you are still a California resident and pursue taxes on all worldwide income. These disputes require detailed documentation and experienced representation to resolve.
- How does the FTB determine residency?
The FTB applies a “closest connection” test by looking at more than 20 factors, including:
- Location of your primary home
- Where your spouse and dependents live
- Where you vote, bank, and hold licenses
- Where your business or employment is based
Because the test is subjective, disputes are common. Professional residency representation ensures your side of the case is effectively presented.
- What should I do if I receive a notice from the FTB or IRS?
Never ignore tax notices. The worst thing you can do is delay responding, as penalties and enforcement actions escalate. Instead:
- Carefully read the notice and understand the deadline.
- Gather relevant documents.
- Contact a qualified tax professional like Mike Habib, EA, to represent you and respond appropriately.
Having representation ensures you do not accidentally waive rights or agree to unfavorable terms.
- How can penalties and interest affect my tax debt?
Both the IRS and California agencies charge:
- Late payment penalties
- Late filing penalties
- Accuracy penalties (for underreporting income)
- Interest compounding daily
Penalties can double or triple the original balance over time. However, penalty abatement or reduction may be possible if you show reasonable cause or have a clean compliance history.
- What are my options for resolving unpaid taxes?
Taxpayers may qualify for several resolution programs, including:
- Installment Agreements (monthly payment plans)
- Offer in Compromise (OIC) (settling for less than owed)
- Currently Not Collectible (CNC) status (temporary suspension of collections)
- Penalty Abatement (reduction of penalties)
- Bankruptcy considerations (in certain cases)
Choosing the right option depends on your financial situation, compliance history, and the strength of your case.
- Can the IRS or FTB garnish my wages?
Yes. Both agencies can issue a wage garnishment order to your employer, requiring them to withhold a portion of your paycheck until your tax debt is paid.
- The IRS typically leaves you with only a minimum standard amount to cover basic living expenses.
- The FTB and EDD are often more aggressive and can garnish at higher rates.
A tax professional can negotiate to reduce or stop garnishments.
- Can I fight or appeal an IRS or FTB action?
Yes. Taxpayers have rights to:
- Appeal audit findings
- Challenge residency determinations
- Dispute tax assessments
- Request a Collection Due Process (CDP) hearing
Professional representation is crucial in appeals, as strong legal and factual arguments significantly increase your chance of success.
- How do payroll tax problems affect California businesses?
California businesses must withhold payroll taxes and remit them to the EDD. Failure to do so can result in:
- Heavy penalties and interest
- Personal liability for owners or officers (Trust Fund Recovery Penalty)
- Criminal tax charges in extreme cases
Tax professionals can help negotiate settlements, prevent criminal exposure, and bring businesses back into compliance.
- What about sales and use tax audits in California?
The CDTFA conducts audits of businesses to ensure sales and use tax is properly collected and remitted. Problems arise if:
- Records are incomplete
- Exempt sales are not documented
- Out-of-state sales are improperly reported
Audits often result in large unexpected assessments. Representation helps ensure that deductions, exemptions, and credits are properly defended.
- Why is professional representation important for California tax problems?
Tax agencies—especially the FTB, EDD, and CDTFA—are aggressive in collecting revenue. Without professional help, taxpayers often:
- Overpay due to lack of knowledge
- Fail to assert valid defenses
- Miss deadlines, losing appeal rights
- Face unnecessary asset seizures
A licensed Enrolled Agent like Mike Habib, EA can:
- Negotiate directly with the IRS and California agencies
- Secure payment arrangements or settlements
- Protect your assets and income
- Ensure your rights are protected throughout the process
- Why choose Mike Habib, EA for California tax representation?
- 20+ years of experience in federal and state tax matters
- Licensed Enrolled Agent (EA) authorized to represent clients before the IRS and all 50 states
- Specializes in California tax problems, including FTB residency disputes, payroll tax issues, and sales/use tax audits
- Proven track record of negotiating favorable settlements and payment plans
- Nationally recognized, trusted by clients across the U.S.
- BBB A+ Accredited since 2007 with 5-star client reviews
Mike Habib, EA provides personalized, ethical, and aggressive representation to help individuals and businesses achieve the best outcome possible.
- How does the representation process work with Mike Habib, EA?
- Initial consultation – Review your tax problem and options.
- Engagement – File a power of attorney (POA) to stop direct contact from the IRS/FTB.
- Investigation – Secure transcripts, analyze liabilities, and evaluate defenses.
- Strategy development – Tailor a resolution plan (installment agreement, OIC, abatement, etc.).
- Negotiation and representation – Handle all communications and negotiations with tax agencies.
- Resolution and compliance – Finalize agreements and ensure ongoing tax compliance.
This structured approach removes stress and ensures your rights are fully protected.
- What sets your tax firm apart from others?
- Direct personal attention (no “assembly-line” approach)
- Clear communication and transparency
- Aggressive defense against IRS and FTB collections
- Focus on results, not billable hours
- Trusted reputation backed by BBB A+ accreditation and 5-star reviews
Clients often choose Mike Habib, EA after unsatisfactory experiences elsewhere, because of the integrity and results he delivers.
- How can I get started?
If you’re facing California tax problems such as unpaid taxes, levies, liens, or residency disputes, you don’t have to handle it alone.
Contact Mike Habib, EA today for a confidential consultation and take the first step toward protecting your assets, resolving your tax issues, and regaining peace of mind.
📞 Call: 877-78-TAXES [877-788-2937]
🌐 Website: www.myirstaxrelief.com
Final Thoughts
California tax problems—from back taxes and tax liens to residency disputes and payroll audits—can feel overwhelming. The IRS and state agencies have vast resources and authority, but taxpayers have rights too.
With the help of experienced tax representation from Mike Habib, EA, you can stop aggressive collection actions, negotiate favorable settlements, and resolve your tax matters with confidence.
Don’t wait until the problem worsens—proactive representation is the key to protecting your finances and your future.