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.
π Who Are the FTB, CDTFA, and EDD — and What Do They Enforce?
β 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
β 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
π Sales Tax & Use Tax Audits in California
β EDD – Employment Development Department
- Administers:
- Payroll taxes
- Unemployment Insurance (UI)
- Disability Insurance (SDI)
- Employment Training Tax (ETT)
- Audits for worker misclassification and late filings
π Payroll Tax Problems with the EDD and FTB
β οΈ 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.
π§Ύ 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
β Step-by-Step: What to Do if the FTB, CDTFA, or EDD Is Targeting You
β 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.
β 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
π What Happens If You Ignore FTB Notices
β 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
β 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
π FTB Offer in Compromise vs Installment Agreement
β 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
π 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
π What the FTB Can and Can’t Legally Seize
π§ 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
π Call
657-218-5700
π
www.orangecounty.cpa
Frequently Asked Questions
Why would the FTB come after my business if the problem is sales tax?
The CDTFA may refer unpaid balances to the FTB for enforced collections — including levies, liens, and business suspensions.
Can my business be suspended by the FTB for EDD or CDTFA issues?
Yes. If you have unresolved tax or fee liabilities, the FTB can suspend or forfeit your business registration even if the original issue came from another agency.
What happens if I ignore notices from the CDTFA or EDD?
Your debt may be sent to the FTB for enforced collection — often with added penalties and reduced options for relief.
Can I get a payment plan or settlement for FTB debt?
Yes — depending on your financial situation, you may qualify for an Installment Agreement, Offer in Compromise, or hardship deferral.
ο»Ώπ£ About the Author
Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, based in Orange County, California.
With over a decade of experience helping individuals and businesses resolve serious IRS and State tax issues, Marc specializes in tax resolution strategies including Offers in Compromise, wage garnishment relief, and back tax compliance.
He is licensed as a Certified Public Accountant in both California and Oklahoma, and has a proven track record of helping clients settle complex tax debts and regain financial stability.
π Learn more at www.orangecounty.cpa or call (657) 218-5700.
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