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ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – HOW TO GET A LATE FILED CUIAB PETITION DEEMED TIMELY FILED – PART 1

By Robert S. Schriebman

2019

Introduction

This is Part 1 of a 2-Part series that will discuss the timeliness of a petition. Most EDD audits result in the EDD issuing a Notice of Assessment. Very few EDD audits result in "no change." Essentially a no change audit means that the EDD has blessed the employer-petitioner's business model. If an EDD audit was a Monopoly game, a no change allows you to pass Go and collect $200. But that is the exception and not the rule.

An EDD Notice of Assessment usually has two dates set forth in the upper right-hand corner: an issue date and a mail date. A timely petition must be filed with the CUIAB no later than 30 days after the date of service of the Notice of Assessment. An additional 30 day period is allowed for good cause.. There is no specific law telling us which of the two dates on the Notice marks the beginning of the first 30-day period. Is it 30 days from the date of issuance or 30 days from the date of mailing? My experience, after many hearings before administrative law judges, tells me that to be safe one should count 30 days from the issuance date, but judges do accept the filing of a timely petition within 30 days after the date of mailing – it looks like you are safe either way.

The problem comes when a petition is filed weeks or even months after the expiration of the basic two 30 day periods just discussed. Is it possible to treat a petition that is filed way after both of these 30 day periods have expired as timely?

If a petition is filed weeks or even months after the issuance or mailing dates, you can expect to have a judge hearing. During that hearing the judge will listen to testimony and reach a decision on whether a very late dated petition can be deemed timely filed.

These procedures can be very important especially when the EDD has levied on the employer-petitioner's bank account because the assessment filing period has been defaulted. A defaulted assessment is turned over to an EDD Collector who will levy on the employer-petitioner's bank account with no prior notice or warning. However, if a judge rules that a late filed petition is deemed timely filed, all collection action must stop immediately. The employer-petitioner may also have the right to demand a refund on any collected levied proceeds.

In this series of articles we will look at examples of situations where a late filed petition has been deemed timely filed and where it has not been deemed timely. The bottom line is to be able to find errors on the part of the EDD in the assessment process. If the late petition is primarily due to negligence on the part of the petitioner, or if the EDD has done nothing wrong, the judge will have no power to rule in the petitioner's favor.

In this Part 1, we will review an example of where the EDD has violated the due process rights of the employer-petitioner in assessing a deficiency. We will also review the law with regard to the standards judges must use in ruling in the petitioner's favor. In Part 2 we will review a case study where the petitioner lost the battle.

Case Study # 1 - The Late Filed Petition Is Deemed Timely Filed

Facts: The employer-petitioner was audited for the years 2014 through 2017. In January 2018, the EDD issued its Notice of Assessment and sent it to the employer-petitioner via certified mail. Somehow the Post Office failed to deliver the Notice of Assessment. The employer-petitioner never received it. The EDD's internal records disclosed that the employer-petitioner did not file a timely petition. The defaulted assessment was turned over to an EDD Collector. A tax lien was filed against the employer-petitioner, and a bank account levy was initiated in late 2018. As soon as the employer-petitioner was aware of the levy, he contacted my office for representation. No time was wasted.

I asked the EDD Audit Office for proof that the Notice of Assessment had been timely issued. I received a copy of the Notice together with a USPS tracking number. A review of USPS records disclosed that while the EDD timely deposited the Notice in the mail, and the certified letter went from place to place, there was no tracking history of any actual delivery.

Upon learning the above, I filed a petition in early 2019 and requested that the CUIAB treat the petition as timely filed. A few months later, my client and I had a judge hearing. Here is what the judge decided.

  • A petition must be filed within 30 days of service of the Notice of Assessment; an additional 30 day period may be granted by a judge upon the showing of good cause. Judges have the discretion of granting a favorable decision even after these two 30 day periods have expired. (CUIC § 1222)
  • CUIAB Precedent Decision P-T-364 states the basic two 30 day time periods discussed above. The decision also states that if the petition is filed after the first standard 30 day period, it may be considered timely if it was filed within the second 30 day extension if there was good cause for the delay.
  • If the petition is filed after the expiration of both 30 day periods, it cannot be considered on the merits unless estoppel can be invoked against the EDD.
  • An assessment is served on the employer-petitioner's -petitioner when it is mailed by certified mail to the correct address of the employer as it appears on the EDD's records (CUIC § 1206).

If a petition is filed beyond 60 days from the date of mailing, the only way it will be considered timely if it can be shown that the EDD made an error in the assessment process. In our example above, the EDD chose the USPS as its agent for sending out the Notice of Assessment. By law the EDD must use the Post Office. If the Post Office drops the ball and fails to timely deliver the Notice, it's the EDD's fault for not seeing to it that the Notice was actually delivered. This constitutes an error on the part of the EDD. This is the estoppel that the statute refers to.

An employer-petitioner must be diligent in protecting his/her rights. Once it is learned that the assessment process was faulty, all steps must immediately taken to show a judge that no time was wasted in filing the late petition. The judge is going to ask the employer-petitioner very pointed questions during the hearing that go to the exercise of due diligence in the filing of the late petition. In other words, the employer-petitioner cannot learn of the EDD's error in March and wait until June to take action.

Conclusion

The objective is to convince the judge that actions were taken promptly and timely to protect the employer-petitioner's rights, once he/she has learned of any procedural assessment errors on the part of the EDD. This is the meaning of timeliness within the letter and spirit of CUIC §1222.

In Part 2, we will review a case study where the judge ruled that the employer-petitioner late petition was not timely filed.

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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. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.

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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