What to Do If the FTB Is Targeting Your Business (And Why the CDTFA Might Be Involved Too)

Introduction: When One Agency Targets You, Two More May Follow

If you’ve received a notice from the Franchise Tax Board (FTB) about your business, don’t assume it’s just about income tax. In California, there are three major tax enforcement agencies that regularly coordinate against businesses with unpaid liabilities:

• The FTB (Franchise Tax Board)
• The CDTFA (California Department of Tax and Fee Administration)
• The EDD (Employment Development Department)

And yes, they talk to each other. Often.

In this guide, we explain what to do if the FTB is targeting your business, how the CDTFA and EDD may be involved, and how Orange County business owners can resolve issues before they escalate into liens, levies, or suspension.

🔎 Who Are the FTB, CDTFA, and EDD — and What Do They Enforce?

✅ FTB – Franchise Tax Board

• Enforces personal and corporate income tax
• Issues business suspensions, liens, and levies
• Collects franchise tax from corporations, LLCs, and LPs
• Collects debt referred from CDTFA and EDD

✅ CDTFA – California Department of Tax and Fee Administration

• Administers and enforces:
• Sales and use tax
• Excise taxes (fuel, cannabis, tobacco, alcohol)
• Environmental fees and surcharges

• Conducts audits and levies for businesses that:
• Fail to file or underreport
• Fail to remit sales tax

👉 Sales Tax & Use Tax Audits in California

✅ EDD – Employment Development Department

• Administers:
• Payroll taxes
• Unemployment Insurance (UI)
• Disability Insurance (SDI)
• Employment Training Tax (ETT)

• Audits for worker misclassification and late filings

👉 Payroll Tax Problems with the EDD and FTB

⚠️ What Happens When You’re Flagged by the FTB?

Once the FTB identifies your business for noncompliance — or is referred a balance by CDTFA or EDD — it can:

• File tax liens on business and personal property
• Suspend or forfeit your business with the Secretary of State
• Issue bank levies or garnish receivables
• Block contracts, licensing renewals, or franchise registrations

Even minor noncompliance (like a late return or underreported sales tax) can trigger major disruption.

🧾 Warning Signs That FTB/CDTFA/EDD Are Targeting Your Business

• Demand for Tax Return or Proposed Assessment
• Notice of Business Entity Suspension or Forfeiture
• CDTFA audit notice or Sales Tax Demand
• EDD audit for worker misclassification
• Franchise Tax Board Notice of State Tax Lien
• Collection letter referring to another agency’s balance

✅ Step-by-Step: What to Do if the FTB, CDTFA, or EDD Is Targeting You

✅ 1. Determine the Source of the Debt

Is this:

• Corporate income tax (FTB)
• Sales/use tax (CDTFA)
• Payroll withholding (EDD)
• A debt referred from CDTFA or EDD to the FTB?

Check your notices carefully or request a full transcript from each agency.

✅ 2. Respond to Open Notices Immediately

Each agency has strict deadlines. Delays = escalation.

• FTB Notice of Suspension? File past-due returns + fees + Form 3557
• CDTFA Audit? Gather sales records and review point-of-sale data
• EDD Audit? Collect payroll records, 1099s, and worker agreements

👉 What Happens If You Ignore FTB Notices

✅ 3. File Any Missing Returns

Even if your business is no longer active, failing to file:

• Triggers automatic assessments
• Prevents reinstatement
• Can lead to liens and levies

✅ 4. Consider Resolution Options

Depending on your balance and ability to pay, you may:

• Request an Installment Agreement
• Submit an Offer in Compromise
• Qualify for a Hardship Deferral

👉 FTB Offer in Compromise vs Installment Agreement

✅ 5. Reinstate or Properly Dissolve Your Business

If suspended, your business can’t legally operate or enforce contracts.

• Use FTB Form 3557 for reinstatement
• Coordinate with the Secretary of State
• File dissolution paperwork if shutting down

🔒 What the FTB/CDTFA/EDD Can Legally Seize

• Bank accounts
• Receivables
• Business property
• Sales tax refunds
• State-issued contracts or payments

They cannot take:

• Social Security or retirement funds (unless withdrawn)
• Protected homestead equity (in some cases)
• Wages beyond the protected exemption level

👉 What the FTB Can and Can’t Legally Seize

🧭 How Boulanger CPA Helps Business Owners in Orange County

We help small businesses across Anaheim, Irvine, Santa Ana, Tustin, and beyond:

• Respond to EDD, CDTFA, and FTB audits
• Resolve tax balances with any California agency
• Reinstate or dissolve business entities
• Set up settlements or payment plans
• Stop levies and protect assets

📞 Call 657-218-5700
🌐 www.orangecounty.cpa

📣 About the Author

Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.

He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.

With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.

Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.

Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.

📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.