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Please Honor My Power of Attorney

INTRODUCTION

You are representing your client during an EDD audit with a proper power of attorney on file when you find that the EDD agent is dealing directly with your client. Worse, the EDD issued a Notice of Assessment that was not timely petitioned to the California Unemployment Insurance Appeals Board (Board). Now the defaulted and finalized assessment has been assigned to an EDD collector. Your client is dismayed and assumed that you received the assessment notice but dropped the ball. You explain to your client that no one from the EDD sent the Notice of Assessment to you, the representative. You're legitimate power of attorney was ignored. Wasn't the EDD obligated to honor your power of attorney and send the Notice of Assessment to you? Does the EDD have a Taxpayer Bill of Rights (TBR) that they must follow? What can you do to avoid things like this from happening?

BACKGROUND

To answer these questions we have to look at the history of taxpayers bills of rights starting with the initial IRS version TBR-1. The IRS TBR-1 was part of the Technical and Miscellaneous Revenue Act of 1988 (P.L. 100-647). One of the primary purposes of TBR-1 was to address the IRS's practice of ignoring a practitioner's valid power of attorney. The IRS must honor a valid power of attorney. It generally can not go around that power of attorney and contact the taxpayer. Only under extreme circumstances may the IRS disregard a power of attorney. Many internal procedures must be followed in order to do so (IRC Sec. 7521).

The EDD does have its version of TBR known as the "Employment Taxpayers' Bill of Rights". These rights are set forth in CUIC Sec. 1231 et seq. We will discuss these provisions in detail later in this article. The EDD was the first California taxing agency to honor an informal bill of rights modeled after IRS TBR-1, but it was the last agency to formally enact a bill of rights. The FTB and the BOE enacted their respective versions first.

FTB TAXPAYERS' BILL OF RIGHTS

In 1988, the legislature adopted the Harris-Katz California Taxpayers' Bill of Rights Act. It was modeled after the IRS version. In enacting this legislation, the FTB was in the foreground promoting passage of its TBR in the interest of fair treatment to taxpayers. The provisions can be found in RTC Secs. 21001-21022.

The key provisions of the FTB's version of TBR relate to the establishment of the position of taxpayer advocate and protections from abuses by FTB tax collectors. One of the key provisions is RTC Sec 21011 that provides that the taxpayer has a right to have his or her attorney, accountant, or other representative present at any FTB hearing and to have the FTB respect and honor a representative's power of attorney. It also provides rights and procedures for taxpayer lawsuits in the Superior Court for reckless and intentional violations of the tax law by an FTB employee (RTC Sec. 21021).

A taxpayer who successfully litigates against the FTB in Superior Court is entitled to reasonable litigation costs and reimbursement for professional fees (RTC Sec. 21013).

BOE TAXPAYERS' BILL OF RIGHTS

Like the FTB version, the BOE adopted the Harris-Katz California Taxpayers' Bill of Rights in 1988 (RTC Sec. 7080-7099).

The key provisions of the BOE's version of TBR, relate to the establishment of the position of taxpayer advocate and protections from abuses by BOE tax collectors. One of the key provisions is RTC Sec 7088 that provides that the taxpayer has a right to have his or her attorney, accountant, or other representative present at any BOE hearing and to have the BOE respect and honor a representative's power of attorney (RTC SEC. 7090). It also provides rights and procedures for taxpayer lawsuits in the Superior Court for reckless and intentional violations of the tax law by a BOE employee (RTC Sec. 7099).

EDD EMPLOYMENT TAXPAYERS' BILL OF RIGHTS

The EDD does have a legislated Employers' Bill of Rights (EBR). These provisions are set forth in CUIC Secs. 1231-1241. Most of this legislation was enacted in 1995 or 7 years after the FTB and BOE versions. The EBR is reproduced in a handy EDD pamphlet that you can obtain free from the EDD. It is entitled Employers' Bill of Rights (Form DE-195, Rev.10, 04-09).

One of the most important features of EBR was the creation of the EDD's version of the taxpayer ombudsman, the Problem Resolution Office. Information about this office can be found on the EDD's website www.edd.ca.gov.

The EBR stresses the following points:

  1. Courteous and timely service.
  2. Confidentiality.
  3. Accurate advice and assistance.
  4. Clear and accurate account statements.
  5. Rights relating to extensions of time to file returns and pay taxes.
  6. Rights relating to waivers of penalties.
  7. Rights to an audit appeal.
  8. Rights relating to the collection process.

Unlike the FTB and BOE versions of TBR, the EDD version does not set forth taxpayers' rights during a tax audit! However, the EDD's handout publication states that the taxpayer will have the following rights during an audit:

  1. The right to an impartial audit and a full explanation of EDD audit findings.
  2. The right to representation during an examination.
  3. The right to a copy of the audit file.

Again, these are only EDD internal policies; they are not enacted state laws. The FTB and BOE versions regarding taxpayer representatives are enacted state laws. In reality, the EDD version is very much watered down.

Do the EDD internal manuals provide any assurances that the EDD will honor a representative's power of attorney? The EDD Audit Manual discusses such topics as the auditor's responsibilities and rules of conduct. However, there are absolutely no provisions dealing with honoring a representative's power of attorney. The EDD Collection Manual states that the EDD follows the collection practices contained in the Rosenthal Fair Debt Collection Practices Act cited in Civil Code Sec. 1788- 1788.33 (Act). The EDD endorses the principles listed in the Act in an effort to ensure that collectors exercise fairness, honesty, and regard for the rights of the taxpayer during collection activities. The Collection Manual simply mentions the Taxpayers' Bill of Rights as something for the collector to internally check off. There are no specific guidelines presented.

Taxpayers' actual "rights" under the EDD version of TBR are very limited. Provisions relating to audit representation and collection procedures and processes are not laws, they are policies. With regard to the EDD honoring your power of attorney during an audit, this too is a matter of internal policy and practice, but it is not law and it is not set forth in stone. In the beginning of this article I told you about a fairly common scenario where the EDD has a valid power of attorney, may have worked closely and professionally with you during the audit, but ignores your power of attorney when issuing a Notice of Assessment. This may be due to the fact that often the audit takes place in a local EDD office, but the Notice of Assessment is sent from Sacramento.

PROTECTING YOURSELF - WHAT TO DO

What can you do about EDD violations of your power of attorney? Be proactive! You should make a written request to the EDD agent to copy you on any and all correspondence especially when a Notice of Assessment is issued. If your request is not honored, complaining to the agent's supervisor in writing should be done. You need to create a written record of EDD violations. More importantly, you must inform your client clearly never to assume that you are copied on any correspondence he or she may receive. Your client must keep a sharp eye out for any assessment notices. Your client should be instructed to send all EDD correspondence to you immediately upon receipt. You do not want to find yourself before an administrative law judge trying to argue why you are entitled to file a late petition or other document because your EDD power of attorney was ignored.


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.