ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – DODGING THE BIG BULLET – THE EDD’S IMPROPER USE OF THE CORPORATE INFORMATION QUESTIONNAIRE – PART 2
By Robert S. Schriebman
This is Part 2 of a 2 Part series.
In Part 1, I discussed the difference between the IRS vs the EDD assessment of personal liability for unpaid corporation or LLC payroll taxes. The EDD ascertains the target of the personal level assessment through the use of Corporate Information Questionnaire. This is known as a CUIC § 1735 assessment. Ever since I can remember, the personal level assessment is a function of the EDD’s Collection Division. Here is how it works.
Traditionally, the EDD auditor conducts a worker status examination and then issues a Notice of Assessment. An Audit Report (AR) is also generated. The last portion of the AR is a short checklist of potential targets of the 1735 assessment should the collector eventually elect to pursue the matter if the assessment is not paid in full by the employer. The auditor traditionally is no longer involved – but wait – things are changing.
Recently, I was retained to represent an employer for an EDD audit. The auditor sent an email introducing herself, asked the usual questions, but attached a Corporate Information Questionnaire for my client to complete during the initial stage of the audit. I informed the auditor that the Questionnaire is traditionally part of the collection process and is only required if an assessment has been made but has not been paid. The Questionnaire has no part in the audit process. In response, the auditor informed me that EDD upper management now requires that the Questionnaire be completed during the audit process.
Attacking the EDD’s Improper Demand for the Questionnaire at the Beginning of the Audit Process
I was deeply disturbed by the EDD’s demand that my client complete and submit the Corporate Information Questionnaire prematurely at the beginning of the audit process. Afterall, when an audit is in its infancy, and the auditor has not received the usual required documentation or has not had an opportunity to review that documentation, the EDD has no business asking questions that have to do with an unpaid assessment; there has been no assessment. The assessment and collections processes are premature. I was also disturbed with what I firmly believed to be potential unconstitutional violations of the Fourth, Fifth, and Sixth Amendments of the U.S. Constitution and the California equivalent.
I challenged the auditor’s demand by writing to the manager of the Area Audit Office (AAO) and the Taxpayer Advocate, expressing my concerns that the Questionnaire amounts to a confession when there is nothing to confess. Randall Ginise is the duly appointed EDD Taxpayer Advocate. In my email to Randall Ginise, I stated the following,” I want to go on record raising the strongest objection possible to this requirement and I want to go on record as refusing to advise any client of mine to complete and sign this document.”
The AAO manager did not respond, but Randall Ginise, responded immediately.
The Taxpayer Advocate to the Rescue
Randall Ginise, The Taxpayer Advocate, went to bat for California employers. He met with top management at the EDD and expressed my concerns as well as his own. He argued that the premature requirement for the Questionnaire does not create a taxpayer-friendly audit environment. EDD management agreed!
The requirement for the Questionnaire, at the beginning of the audit process, was indeed premature and the requirement for the Questionnaire would be dropped. California employers just dodged a huge bullet.
Don’t ever believe that one person cannot make a difference. One person can make all the difference in the world. If I did not take the initiative to challenge the EDD’s demand for the Questionnaire by involving the Taxpayer Advocate, the problem would have never been brought to management’s attention. The Advocate took the ball and ran with it. Randall Ginise let management know that their decision was not taxpayer friendly and generated push back. I am happy to tell you that the Corporate Information Questionnaire requirement during the audit process has been shelved.
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 50 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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