FTB Financial Hardship: Form 3561, Expenses, and Levy Release

If California’s Franchise Tax Board has levied your bank account or garnished your wages and you cannot cover rent, food, utilities, or medical care with what’s left, you can ask for an FTB financial hardship levy release. The agency will lift the levy when your documented monthly expenses, measured against federal cost-of-living standards, exceed your income after the collection action. The tool that gets you there is FTB Form 3561, backed by proof of what you earn and what you spend.

What Counts as Hardship

Hardship, in the FTB’s eyes, is not a tight month. It’s the point where the levy prevents you from paying for necessities: housing, utilities, groceries, medical care, and transportation to work. Losing discretionary spending doesn’t qualify. The test is whether the collection action threatens your ability to function day to day.

California’s Taxpayers’ Bill of Rights, at Revenue and Taxation Code Sections 7080 through 7099, requires the state to protect taxpayer rights and property during collection.¹ The FTB has stated that when a taxpayer faces “temporary financial hardship,” it will work to delay collection actions during that period.² Proving it is on you.

How the FTB Measures Your Living Expenses

The FTB doesn’t accept your expense numbers at face value. It compares what you report against the IRS Collection Financial Standards, also called Allowable Living Standards.³ Those standards come in two flavors.

National Standards

National standards cover food, clothing, housekeeping supplies, personal care, and a miscellaneous category. You get the full allowance for your household size without having to itemize. A single person is allowed $839 per month. Two people get $1,481, three get $1,753, and four get $2,129. Each additional person adds $394.⁴ The miscellaneous portion, which covers items like bank fees, credit card payments, and school supplies, does not allow deviation.

Local Standards

Local standards cover housing, utilities, and transportation. These are capped at the lesser of your actual cost or the IRS benchmark for your county. Transportation splits into ownership (lease or loan) and operating (fuel, maintenance, insurance), each capped the same way. A single person normally qualifies for one vehicle. If you use public transit, you receive the standard transit allowance per household without documenting individual fares.³

Other Allowable Expenses

Beyond the standards, the FTB may allow expenses necessary for health, welfare, or income production. Court-ordered child or spousal support, payments on federally guaranteed student loans, federal IRS installment agreement payments, health insurance premiums, and out-of-pocket medical costs all count if documented with the balance owed and any payment agreement.³

The math is simple. Add up your allowable expenses. Subtract your net monthly income after the levy takes its bite. If expenses exceed income, that gap is your hardship case, and the wider it is, the stronger the argument.

Filling Out FTB Form 3561

Form 3561, the Financial Statement, is the document the FTB uses to decide. Download it from the FTB website. If you submitted an IRS Form 433-A or 433-F within the past 12 months, the FTB will accept that instead.³

The form asks for a full picture:

Every bank account you hold, including checking, savings, investment, and business accounts, even ones at zero. Don’t list bank loans in this section.
All credit cards and lines of credit, including any with no balance.
Real estate you own or are purchasing, with address, mortgage balance, and market value so the FTB can figure equity.
Other assets: vehicles by year, make, and model; whole life insurance; valuables like coin collections; business equipment. Leased vehicles are noted separately.
Monthly income: net wages, self-employment income with a Schedule C or year-to-date profit-and-loss statement, net rental income on a cash basis (no depreciation), and other sources.
Monthly expenses broken into the local standards, national standards, and other allowable categories described above.

Convert non-monthly expenses carefully. Divide quarterly payments by three. Multiply weekly by 4.3, biweekly by 2.17, semimonthly by two. A conversion error either understates your hardship or invites the reviewer to question your other numbers.

Documents to Send With It

A form without proof rarely survives review. Gather these before you call:

Pay stubs covering at least a full month. For self-employment, your latest Schedule C or a year-to-date profit-and-loss statement.
Your lease, rent receipts, or mortgage statement showing the monthly payment.
Recent utility bills and any invoices or statements for ongoing medical care not covered by insurance.
Statements showing balances and payment terms for student loans, IRS installment agreements, or court-ordered support.
Current bank statements for every account on the form, showing what the levy has done to your available funds.

Accuracy beats volume. One inconsistency between the form and the backup gives the reviewer a reason to doubt the rest. If a figure shifted since your last statement, note it and explain why.

Submitting the Request

With Form 3561 and your documents ready, call FTB Collections. The FTB handles levy calls with urgency because of the immediate financial impact.⁵ Have your FTB account number, Social Security number, and the completed statement in front of you.

The representative reviews your Form 3561 on the call and asks you to send it and your supporting documents, usually by fax or secure upload. A decision typically follows once the reviewer has the complete package. If the FTB agrees the levy is causing genuine hardship, it sends a release notice to your bank or employer instructing them to stop withholding.

You can have a tax professional handle this for you. Enrolled agents, CPAs, and attorneys can represent you after filing a power of attorney with the FTB, which can lift a real burden when you’re already under financial stress.

If the FTB Says No

You have the right to an independent administrative review of the collection action. The person reviewing your case must not have been involved in the original collection decision, and you can request a hearing with an authorized representative present. Deadlines are tight and depend on what you’re challenging:⁶

Wage garnishment or bank levy: within 30 days of the date on the Final Notice Before Levy.
Tax lien: within 30 days of the notice of intent to record a lien, or within 15 days of the date on the Notice of State Tax Lien.
Installment agreement rejection or termination: within 30 days of the notice.

The review right sits in Revenue and Taxation Code Sections 19008(e), 19225, and 21015.5.⁶ The FTB is also required to send written notice at least 30 days before its first levy, which explains the amount owed and your review rights. That 30-day window is your best chance to file a hardship claim before money is taken.

If regular channels don’t work, the Taxpayers’ Rights Advocate is an independent office within the FTB that can step in. Financial hardship from a bank levy, wage garnishment, or lien is one of the categories it handles.⁷ The Advocate usually requires that you’ve already gone through normal FTB communication first, but makes an exception when delay would create immediate economic hardship from an active levy or garnishment. Reach the office at 800-883-5910, by fax at 916-843-6022, or through the online form on the FTB website. Contacting the Advocate is not a formal protest and does not extend any deadline for filing one.⁶

What a Release Actually Does

A release stops the withholding. It does not erase the debt. Interest and penalties keep running on the unpaid balance.² The release stays in place while the hardship lasts, and the FTB may ask for updated financial information periodically to confirm your situation. If updates don’t come, or if your income improves and the debt goes unaddressed, collection can start again.

File future returns on time and pay current-year taxes as they come due. Falling behind on new obligations while you’re under hardship protection signals a worsening problem, and it’s the fastest way to lose the relief you just secured.

How Much the FTB Can Take From Wages

If your levy is a wage garnishment, knowing the limits helps you frame the hardship argument. For higher earners, the FTB takes 25% of pay after required subtractions for taxes, Social Security, and Medicare. Lower earners see less, or nothing, depending on the pay period. When weekly net pay is $290 or less, the amount withheld drops below the 25% figure or reaches zero.⁸

Even 25% can push a household under the line for basic expenses. Run the numbers against the IRS living expense standards. If net income after garnishment falls short of your allowable expenses, the hardship case is on paper waiting to be filed.

After the Release: Installment Agreements and Offers

Once your finances stabilize, the FTB expects you to pay the balance down. For personal debts of $25,000 or less, you can set up a payment plan of up to 60 months. The setup fee is $34, added to the balance. You must have filed all income tax returns for the past five years to qualify.⁹

Sequence matters here. You cannot apply online for an installment agreement while an active wage garnishment, bank levy, or other collection order is in place. Apply by phone at 800-689-4776 or by mailing Form 3567.⁹ Get the levy released first through your hardship claim, then set up the plan. While an installment agreement is active, the FTB is barred from issuing new levies, and that protection extends 30 days past a rejection or termination so you can request review.⁶ Interest and penalties continue during the agreement, so paying above the minimum when you can shortens the timeline and the total cost.

If even a payment plan is out of reach, the FTB’s Offer in Compromise program lets you propose settling for less than the full amount. Eligibility depends on your ability to pay, asset values, current and projected income and expenses, likelihood of improvement, and whether the offer serves the state’s interest. Applying for an OIC does not automatically halt collection; the FTB usually pauses new actions while reviewing but may continue if delay puts recovery at risk. Penalties and interest keep accruing during review. If approved, all collection actions stop and state tax liens are released.² The financial disclosure mirrors the hardship claim, so a completed Form 3561 carries most of the weight into an OIC application.

1
Justia. California Code Revenue and Taxation Code – The California Taxpayers Bill Of Rights
2
Franchise Tax Board. Make an Offer on Your Tax Debt (Offer in Compromise)
3
California Franchise Tax Board. FTB 3561C PC Financial Statement and Instructions
4
Internal Revenue Service. National Standards: Food, Clothing and Other Items
5
Franchise Tax Board. Collections
6
Franchise Tax Board. FTB 5821 Publication Protest Procedures
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Franchise Tax Board. Taxpayer Advocate Services
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Franchise Tax Board. How Much to Garnish From an Employees Pay
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Franchise Tax Board. Payment Plans