FTB bankruptcy program October 2020 Tax News

Our bankruptcy program:

• Honors the protective stay
• Discharges the proper tax debts under the bankruptcy law
• Resolves the debt repayment process

We monitor bankruptcy filings to properly facilitate cases through bankruptcy by working with bankruptcy attorneys and trustees in order to ensure taxpayers are accounted for equitably.

In recent years, the bankruptcy program has seen a gradual decline in both personal and business bankruptcy filings. However, as a result of the COVID-19 pandemic we recognize many businesses and individual taxpayers have been, or will be, negatively impacted by the slower economy, in some cases:

• Losing significant business income
• Closing their business altogether
• Losing their employment

Although we are not currently seeing an increase in personal bankruptcies, and only a slight increase in business bankruptcy filings, we anticipate rising bankruptcy filings over the next year and beyond.

If your clients are considering filing for bankruptcy, the following information can assist them:

File all missing tax returns – If you need more information on your client’s tax account information, contact the bankruptcy program at (916) 845-4750. Collection actions will not stop until we are notified that your client filed for bankruptcy with the federal bankruptcy courts.

Continue to pay outstanding tax debt – If you know that some of your client’s tax debt may be due after bankruptcy, you can advise them they should still make voluntary payments. Benefits to making voluntary payments include:

• Reduce ongoing interest
• Reduce tax debt owed after bankruptcy
• Prevent collection actions after bankruptcy

After filing for bankruptcy – Contact our bankruptcy program with your client’s bankruptcy case number, or a copy of the petition filed with the federal courts. At that time, we will stop collection action on your client’s tax debt, which may include the issuance of liens, wage garnishments, or seizures.

Bankruptcy Program’s contact information:

Phone:

(916) 845-4750

Fax:

(916) 845-9799

Mail:

Personal Bankruptcy
Franchise Tax Board
Personal Bankruptcy MS A340
PO Box 2952
Sacramento CA 95812-2952

Business Bankruptcy

Franchise Tax Board
Business Entity Bankruptcy MS A345
PO Box 2952
Sacramento CA 95812-2952

Note: Although your client has filed for bankruptcy, they still have a requirement to file their current year tax return(s). If you or your client have questions regarding their tax debt, including bankruptcy disputes, claims issues, or other related reasons, please contact us. It may be possible to resolve the issues without court intervention.

Visit our website for information.