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ASK THE EDD ATTORNEY - MY COMPANY IS OUT OF BUSINESS BUT I STILL KEEP GETTING EDD ASSESSMENTS. WHAT CAN I DO?

By Robert S. Schriebman

January 14, 2015

INTRODUCTION

The year 2015 started off with an interesting case. Mr. Jones closed his small corporate business in mid 2013. The corporation filed all quarterly EDD returns and totally paid all employment taxes up to the date of closure. However, the corporation kept getting EDD assessments for the remainder of 2013 into 2014. Each Notice of Assessment was relatively small. Mr. Jones did not bother to file petitions with the CUIAB for each assessment. He now has a substantial cumulative assessment.

The EDD Collection Division has contacted Mr. Jones and demanded that the corporation pay the entire deficiency as soon as possible. Money is tight so Mr. Jones has asked for an installment payment arrangement. The EDD collector is considering the request for an installment payment agreement, but he is now seeking to assess Mr. Jones individually as the responsible person for corporate payroll tax compliance.

Should Mr. Jones simply pay all these small assessments? Should he then file Claims for Refund?

MR. JONES’ DILEMMA

The corporation went out of business in mid 2013. It shut its doors and had no employees. Mr. Jones did not take any compensation or any distributions at all. It is clear that the corporation does not owe the EDD any money whatsoever.

Mr. Jones is now facing personal assessments for corporation taxes that are not legally owed.

WHAT MR. JONES SHOULD HAVE DONE

We see this happening often with the EDD. This is not necessarily the EDD’s fault. When a company ceases doing business it should file all final payroll tax and income tax returns, and put the word FINAL on the top of each return in red letters. A Sharpie works well for this. Mr. Jones should have done this. Failure to designate the last payroll tax return as “Final” has caused the EDD to continue to issue quarterly estimated assessments because the EDD thinks that the company is still in business but not in compliance. Both Mr. Jones and the EDD are wrong, but the EDD has the upper hand.

Mr. Jones should have challenged each and every EDD Final Notice of Assessment no matter how small by filing a petition with the CUIAB. A long formal petition is not necessary. A one paragraph statement that the taxpayer disagrees with the assessment has been known to suffice. Eventually, an administrative law judge will be assigned to hear the matter. The taxpayer can appear before the judge and convince the judge that the assessments are totally bogus. Filing a petition timely prevents the EDD from collecting any portion of any assessment issued to the corporation.

Mr. Jones did not do this. He did not file any timely petition at all. Now the matters are considered as final assessments and are due and payable.

SHOULD MR. JONES JUST PAY THE ASSESSMENTS AND WALK AWAY?

In the Jones matter the amount of the assessments totaled about $8,000. I informed him that the amount involved was too small to hire legal representation. However, I cautioned Mr. Jones that if he pays these amounts, even though he does not owe them, he will have to file at least one refund claim for the total payments. Most likely the EDD will deny the claim. This will force Mr. Jones to file a Refund Petition with the CUIAB. It is going to take a long time before a judge will be assigned to the matter. He will have the right to bring a refund suit in the Superior Court. However, this remedy is not practical because of the expense involved of hiring counsel.

Therefore, I advised Mr. Jones not to pay these assessments.

WHAT REMEDIES ARE LEFT TO MR. JONES?

Mr. Jones is in a bad spot because he failed to protect his rights. He should have filed timely petitions for each and every Notice of Assessment. These types of small assessments occurring after the closure of a business are usually computer generated by the EDD. However, it is a mistake to conclude that this is an automatic process. Somewhere within the EDD there is person who makes the decision to issue each and every one of these assessments. The task is to find that person and convince him or her that the business is closed.

I suggested to Mr. Jones that he become proactive. He should contact the EDD taxpayer advocate office. The Advocate will assign someone to work within the system to stop the issuance of these quarterly assessments and to abate the accruing assessment in full. The Advocate will also contact the unit within the EDD responsible for issuing these assessments so the process will be terminated.

I also advised Mr. Jones that if he gets little or no assistance from the Advocate he should contact the Executive Director of the EDD for direct intervention from the very top. I have personally done this with clients in similar situations, and it has been very effective.

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An EDD attorney, Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States.

As a trusted EDD lawyer, Robert S. Schriebman has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates.  See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure”, both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates.  See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure”, both published by Commerce Clearing House.

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