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ASK THE EDD LAWYER- HOW DO I ATTACK A BOGUS EDD AUDIT ASSESSMENT?

By Robert S. Schriebman

EDD bogus assessments that have no basis in reality and are pure internal estimates can cause havoc with the public. They can be expensive and time consuming to defend and eliminate. Here is a real-life story of what happened to one of my clients and the effort that it took to stop the EDD in its tracks.

One of my clients had a small corporation that ceased doing business in mid 2008. At that time my client formed a new business, as a sole proprietor, and has been in business continuously. The new company hired two employees and religiously filed quarterly EDD payroll tax returns and timely paid each and every quarterly payroll tax bill. However, starting in 2012, my client received quarterly Notices of Assessment from the EDD assessing deficiencies against the old, now defunct, corporation. Each Notice of Assessment was for the exact amount that the sole proprietorship paid for the corresponding quarter. In other words, if the proprietorship filed a third quarter 2012 return and paid $3,000 in EDD taxes, the new corporate Notice of Assessment for that quarter was also in the amount of $3,000. This made absolutely no sense whatsoever. What should you do if this happens to you?

How Are Assessment Notices Prepared and Issued?

EDD Notices of Assessment are primarily generated in two ways: (1) by an EDD auditor conducting an audit; or (2) by the EDD computer that issues an automatic estimated assessment. We tend to blame too many things on computers these days. We need to keep in mind that computers do not act unless a human inputs certain data and programs specific instructions to the computer. Therefore, someone within the EDD is responsible for setting in motion a plague of computer-generated assessments.

First, Protect Your Rights

The first thing that you must do when you receive a bogus Notice of Assessment is to protect your rights. You must prepare and file a petition. There is no magic wording to contest a Notice of Assessment. In an emergency I have written a one-paragraph challenge to an assessment and faxed it to the California Unemployment Insurance Appeals Board (CUIAB). The fax number is 916.263.6763. The next day I prepared a more formal petition. However, the first petition protected my client and established proof that a timely petition had been filed. It is also permissible to fax or send a petition to a local EDD audit office. Any time you use the USPS to send a letter, make sure that your correspondence is sent by Certified Mail with Return Receipt Requested. You should also ask the Post Office to "round stamp" your receipt as proof of timely mailing. Things do get lost in the mail.

Contact the EDD Taxpayer Advocate

I can not praise the folks at the Taxpayer Advocate's office enough. They try very hard to assist the public, and their results are very helpful. The Advocate will assign a caseworker to help solve your problem. The case worker is able to go inside the EDD and find the specific unit and individual responsible for issuing the bogus assessments. This does not mean that the Advocate can stop the process. All the Advocate can do is investigate and request. Even if the Advocate is not able to stop the assessment process, you will gain some insight into why the assessments are being issued.

Have a Judge Hear Your Matter

After you have filed your petition with the CUIAB it will be calendared for hearing before an Administrative Law Judge (ALJ). You will receive full due process of law and have an opportunity to confront the actual person responsible for causing your misery. I recently tried five bogus assessment cases before an ALJ and won every one of them. The judge was upset that my client had to suffer the cost and stress of having to defend bogus assessments. An EDD representative also attended the hearing. He was able to provide the name and phone number of the actual person who issued the bogus assessments. The judge called the person during the hearing and let it be known that he was unhappy with that person's conduct.

It is unfortunate in California that the EDD is the only taxing agency that does not allow the recovery of attorney's fees and costs.

Contact the Chief Executive of the EDD

After we won the five bogus assessments before an ALJ, the EDD issued yet a sixth bogus assessment! My client and I were fed up with this bureaucratic incompetence. I sent a letter to the Chief Executive of the EDD, Patrick Henning asking for his intervention. Mr. Henning can be reached at the following address:

Director Patrick W. Henning
Employment Development Department
722 Capitol Mall
Sacramento CA 95814

I am confident that Director Henning deeply cares about taxpayer’s rights and will use his good offices to put a stop to these bogus assessments once and for all. I will keep you posted.

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An EDD lawyer, 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 attorney, has successfully dedicated more than 30 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 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 and 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.