Can IRS offset my tax refund to collect income tax debts owed to California State?
According to the California Franchise Tax Board, if a taxpayer has a past-due, legally enforceable California income tax debt and are entitled to a federal income tax refund, "Franchise Tax Board (FTB) is authorized to offset that refund and apply it toward your balance due."
Franchise Tax Board (FTB) will in fact send a form "FTB 1102PC, Intent to Offset Federal Payments, by certified mail to the taxpayers last known address."
This letter would explain that the FTB plans to notify Financial Management Service, (a bureau of the U.S. Department of Treasury, administers this Treasury Offset Program) of the taxpayers California Tax Liability or Debt if you do not pay in full within 60 days.
Financial Management Service will then send the taxpayer a notification explaining why your federal refund was reduced, and that it may take several weeks before the federal refund reaches FTB. The Financial Management Service will send any remaining federal refund amount to the taxpayer.