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Will your tax debt cost you your license?

The Franchise Tax Board (FTB) recently released its “Top 500 delinquent taxpayers list”. Found on the list is one West Sacramento resident and four additional people in the greater Sacramento area.

To be “honored” on this list, the individual or business must have state tax delinquencies in excess of $100,000 and have a state tax lien recorded against them. The list includes the taxpayer’s name and address, the liened amount owed, the earliest date a notice of state tax lien was recorded, the taxpayer’s occupational or professional licenses with type, status, and license number, and, in the case of a limited liability company or corporation, the names and titles of the principal officers of the taxpayer.

In 2011 this public shaming list grew from a shaming of 250 people and businesses to 500. For my clients, I’ve generally noticed that a public shaming of their tax debt, while not enjoyed, isn’t usually a major concern or motivator to resolve their tax matter. However, they do get very concerned and motivated when they learn that placement on this list has more than a shame element associated with it.

Pursuant to California Business and Professions Code Section 494.5, the state of California may revoke your driver’s license or professional license if your name is included on the top 500 tax debt list which is published twice a year. Shortly after publication, then the notice of intent to revoke the licenses are sent. That’s when people on the list begin to take action on their debt; which is the real purpose of the public shaming.

For businesses, and individuals to some extent, inclusion on the list also precludes the person or entity from entering into contracts for the acquisition of goods and services with California state agencies pursuant to Public Contract Code Section 10295.4.

Large tax debts, such as the ones publicized on the list, usually take time to incur and likewise need time to resolve. Halting the license revocation process usually involves working to remove the person or entity from the list which the FTB first points out can be achieved by paying the debt owed in full. Other means of correcting inclusion on the list involves setting up a payment plan or otherwise resolving the delinquent tax account. It’s that final option that is usually needed in these types of cases, and the most time consuming.

While all but 500 taxpayers are presently at risk for losing their licenses, it will be interesting to see if the government again increases the amount of people shamed on the list as they believe it is an effective tool in decreasing the tax gap.

This article is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

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