ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – EDD BANK LEVIES REQUIRE QUICK ACTION ON YOUR PART
By Robert S. Schriebman
You owe the EDD. You may have received an audit assessment or you may have failed in your tax compliance by not timely filing quarterly returns or timely paying what you owe. In any event, your debt has been assigned to an EDD collector. The job of the EDD collector is to collect. This is accomplished by filing a Notice of State Tax Lien and by engaging in enforced collection. The most common enforced collection action is to levy on your business bank account. Most EDD levies are made without warning. An EDD collector is free to levy as many times as the collector deems necessary.
This article will discuss EDD bank account levies and the relative short fuse between the time your bank receives the levy notice and the time the bank is required to remit the levied funds to the EDD. That time is only 5 days. You will see that compared to other taxing agencies the time limit on the EDD levy is the shortest, and because it is so short, you cannot afford to drag your feet or you may lose your bank balance to the EDD.
EDD Bank Account Levy Law
The law relating to an EDD bank account levy and the time required before the bank must remit funds to the EDD is found in CUIC § 1755. This section states, in substance, the following:
- The bank must remit the levied funds “…within 5 days of service of the levy…”
- An EDD bank account levy is known as a “continuous levy” – this will be explained below.
Meaning of “Continuous Levy”
A continuous levy means that the levy, once served on the bank, remains in effect for a period of one year. This means that any deposits you make into the account, after the date of levy, must be remitted to the EDD as well.
IRS Levy Compared to EDD Levy
An IRS levy is not a continuous levy. The IRS levy is only good for the amount of money in the bank on the day the levy is served. For example, if the IRS levy is served on Monday when you have only $100 in the bank account, that’s all the IRS will get even though you deposit $5,000 on Tuesday – you keep the $5,000. If the IRS wants the $5,000, they will have to issue you a new levy. On the other hand, an EDD levy, served on Monday will take the $100 and the $5,000 as well, because it is a continuous levy.
EDD Time Limits Compared to FTB, IRS, and SBE (see new name for SBE)
We know from our discussion above that the time limit for the bank to remit EDD levied funds is only 5 days. How does this compare to other taxing agencies?
IRC § 6332(c) requires the bank to hold levied funds for 21 days before remitting those funds to the IRS. This time allows the taxpayer to work out a payment arrangement or to contact the Taxpayer Advocate for relief.
R&T Code § 18670 requires the bank to hold levied funds for 10 days before remitting those funds to the FTB. This time allows the taxpayer to work out a payment arrangement and to convince the FTB to release the levied funds.
SBE (now Know as the California Department of Tax and Fee Administration (CDTFA))
R&T Code § 6703 requires the bank to hold levied funds for 10 days before remitting those funds to the CDTFA. This time allows the taxpayer to work out a payment arrangement and to convince the CDTFA to release the levied funds.
As you can see from this discussion, the EDD has the shortest holding time before the bank is required to remit funds.
Banks Often Don’t Wait the Full Time Period
It is not uncommon for banks to remit funds before the statutory time period. This is also true for EDD levies. Banks are afraid that if they do not remit the funds timely, they will be penalized for holding the funds too long. Unfortunately, there is not much you can do to prevent the bank from remitting funds before the time limit.
EDD Bank Account Levies Require You To Be Proactive FAST!
As soon as you receive notice that the EDD has levied your bank account, it is incumbent upon you not to let any grass grow under your feet. You must be proactive and you must move quickly. This means contacting the assigned collector to try to work out an installment payment arrangement. As this will require you to submit a financial statement, bank statements, and other documentation, ask your collector to contact the bank and place a hold on remitting the funds. If the collector will not work with you, ask to speak with his/her immediate supervisor.
Prompt action on your part may cause the collector to release all or a portion of the levied proceeds back to you.
I have been representing clients in enforced collection matters for many years. Although bank account levies are harsh and extremely stressful, I believe the real purpose is to get you to contact the appropriate taxing agency and work with the collector to set up an installment payment arrangement. I have also found that if you are proactive and work with the assigned collector, all or a part of the levied funds may be returned to you in exchange for an installment payment arrangement.
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.
Web Site Article 409