In 1990 I was contacted by the Ca.Tax Board concerning a few hundred dollars in unpaid revenue for that year or the year prior. In 1992 they had contacted me and set payment arrangements with me witch I defaulted on.At that time they put tax lien on my credit starting in 1992 and lasted 10 years and removed in 2002. I was recently contacted by a collection agency on behalf of the tax board for payment including interest and penalties in the amount of $1900 and change. Do I have to pay this money after such a long period of time and if I refuse what are the repercussions if any?
Here is the text from the website of the California Franchise Tax Board. The link is provided below.
Statute of Limitations on Collection Actions
For many years, no statute of limitations existed on the collection of an income or franchise tax delinquency. Beginning in 2006 2, a statute of limitations (SOL) on our collection actions went into effect.
R&TC Section 19255 was created to require us to permanently abate unpaid debts after 20 years, and established specific circumstances under which debts will remain due and payable beyond the 20-year period.
When does the 20-year SOL start? The time period begins to run on the assessment date, commonly called the statutory lien date (SLD). Collection stays suspend or extend the 20-year SOL. For example, a bankruptcy, an approved installment agreement, or during any other period during which collection of a tax is suspended, postponed, or extended by operation of law will serve to extend the SOL period.
What is the SLD? R&TC Section 19221 provides that if a tax liability is not paid at the time that it becomes “due and payable;” a perfected and enforceable state tax lien is created for the amount of the tax liability. This point in time is called the assessment date or the SLD. If more than one liability is “due and payable” for a particular taxable year, the later date is used. For example, a taxpayer files a return with a balance due on April 15, 1999, and we later audit the year and issue a Notice of Proposed Assessment that becomes due and payable on April 15, 2001, the SLD is April 15, 2001.
What are collection stays? Collection stays are the times when we cannot take involuntary collection action due to one or more of the following reasons:
The taxpayer/debtor is in bankruptcy plus six months.
The taxpayer/debtor is in an approved installment payment agreement.
The taxpayer/debtor is in serving in the military and in a combat zone.
The taxpayer/debtor is in child support collection plus 60 days.
We postpone collection because of a presidentially declared disaster or terroristic or military action.
THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is firstname.lastname@example.org.
The general statute of limitations in California for assessment of unpaid taxes is four years from the date the return is required to be filed. I assume from your facts stated above that you were assessed within that four year period. Where no return or a false or fraudulent return is filed, there is no statute of limitations on assessment or collection of tax. Since you did not stick to your installment plan with the FTB, the FTB evidently issued a levy. Typically speaking, the FTB will renew a levy, lien or judgment every ten years and I have heard of cases where the lien was twenty years old. Paying the deficiency, interest and penalties will result in the levy being released. Refusal to pay the deficiency may result in more collection calls, additional interest, collection fees, liens on real estate owned (in state and out) and perhaps garnishment of wages if you are still working.
Both my colleagues provide good advice and I certainly concur. It's evident the CA Franchise Tax Board is intent on pursuing the funds so it might make sense to work out some form of settlement and be done with the matter.
Evan A. Nielsen is licensed to practice law in California and handles federal tax matters throughout the U.S. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.