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ASK THE EDD LAWYER - UNDERSTANDING YOUR RIGHT TO REPRESENTATION IN AN EDD OR IRS AUDIT

By Robert S. Schriebman
April 13, 2016

Introduction

You have received an audit notice from the EDD in the form of Inquiry Regarding Records. Your audit notice package includes a Pre-Audit Questionnaire and a long list of documents and information that the EDD want you to produce but may not be legally entitled to obtain. This audit package is followed by a call from the EDD setting up your audit appointment in just two weeks. You have concerns and issues that you want to discuss with an experienced professional, but time is of the essence. Do you have a right to postpone the audit until you have a chance to meet and confer, and possibly retain professional representation? If you retain professional representation, does your representative have the right to postpone the audit?

The matter of retaining professional representation is also important if you are being audited by the IRS.

What are your rights to retain professional representation and postpone your EDD or IRS audit?

The EDD Employers' Bill of Rights

The EDD has had a Bill of Rights in one form or another since the IRS came out with the very first version of The Taxpayer Bill of Rights (TBOR) in the 1980s. Even though there were no formal enacted California statutes, the EDD administratively created its own TBOR. The cornerstone of this informal TBOR was the right to retain professional representation before or during an EDD audit. In 1995 the State Legislature enacted an EDD TBOR, and in 2003 the EDD published a small handout entitled "The Employers' Bill of Rights." (DE195) This pamphlet was primarily devoted to establishing payment plans or offers in compromise for the payment of EDD deficiencies and an introduction to the office of the EDD Taxpayer's Advocate. Ironically, there is no mention of your right to representation in this publication.

Enacted Bill of Rights Legislation

In 1995 the California State Legislature enacted Article 11.5 "Taxpayer's Rights" set forth in CUIC §§ 1231 through 1237. This legislation consisted of 4 code sections that dealt with taxpayer education and information, relief from taxes, settlement of tax debts, and protection from discrimination. However, there were no provisions at all dealing with a taxpayer's right to be represented by a professional advisor. So where does this right come from?

The EDD has basically adopted a policy of allowing anyone under examination, or anyone seeking Unemployment Insurance (UI) or State Disability Insurance (SDI) to be represented by a professional advisor. The EDD will postpone an audit for either the taxpayer or the advisor upon request.

New Press Release Dealing With IRS Representation

On March 30, 2016 the IRS published a Press Release dealing with a taxpayer's right to retain representation in all matters with the IRS (Publication FS-2016-18). The Press Release discusses 10 fundamental rights in a revised version of the Taxpayer Bill of Rights (TBOR). The first right that a taxpayer has in dealing with the IRS is the right to retain professional representation. The essential difference in this right between the EDD and the IRS is that under IRS standards the representative must be a licensed professional, such as an attorney, CPA, or an Enrolled Agent. The EDD, on the other hand, really has no licensing requirement at all. In other words, your Aunt Mildred can represent you as easily as a CPA or an attorney.

Here are a few standards set forth in the IRS Press Release concerning your rights to representation:

  • You do not have to be present at any IRS interview as long as you are being represented by a qualified tax professional (a Summons Enforcement Action requires your presence).
  • The IRS must continue or suspend any interview if the taxpayer requests professional representation.
  • A licensed professional must submit a Power of Attorney signed by the taxpayer.
  • If your current income is below a certain level you may ask a Low Income Taxpayer Clinic to represent you for free or a minimal fee. This includes court representation.

If you would like to know more about your rights when dealing with the IRS, you can go on the IRS website and download copies of the following publications:

  • Taxpayer Bill of Rights
  • What the Taxpayer Bill Of Rights Means for You.
  • Forms and Publications About Your Appeal Rights
  • Taxpayer Advocate Service

Conclusion

If you receive an audit notice from the EDD or the IRS understand that you have a right to postpone any audit appointment or meeting to seek the advice of a professional or to retain professional representation. If someone calls you from the EDD, and tells you that you cannot postpone your audit, don't believe it. Ask to speak to that person's manager or supervisor. Explain that you must postpone the appointment to consult with a tax professional. You will get your postponement.

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