Ask The California Employment Tax And Payroll Tax Attorney – Hey EDD, Why Did You Levy My Bank Account?!!
By Robert S. Schriebman
Not much can ruin your day other than an EDD bank account levy without warning. This situation is very stressful for the business person as well as his/her professional representative. Even though I have been practicing for over 50 years, I never take levies calmly. It is about as stressful for me as my client.
The job of a tax collector is to collect! It is that simple. There are significant differences between how the IRS revenue officer does business and how an EDD collector does business. The differences are very significant. The IRS cannot engage in enforced collection action without following the rules set forth in the Internal Revenue Code and specifically IRC §§ 6320 and 6330. These provisions involve collection due process (CDP) proceedings. These provisions give taxpayers rights to administrative and US Tax Court hearings before the IRS can take one dime. These proceedings can go on for two or more years. I am very proud to be the author of these significant taxpayer rights.
The EDD, on the other hand, does not have a CDP process. Once the tax debt is established by law, the EDD collector can levy and garnish wages without warning. There is no opportunity for any type of administrative or established judicial proceedings relating to the legality of the debt or the employer’s ability to pay. By the way, these harsh collection activities also apply to unemployment benefit overpayments.
In this article I will give you insight as to how this type of situation occurs and what you can do to attempt to resolve the matter and keep your funds in your bank account.
Two Types of Assessments: Self-Assessment and Audit Assessment
There are basically two ways an employer can become indebted to the EDD. The first is known as self-assessment. This results when an employer files payroll tax returns but does not pay the payroll taxes shown on the return. Sometimes a clerical error occurs and the EDD will contact the employer to explain the disparity between the amount shown on the return and the amount that should have been reported per return. A self-assessment is essentially an admission of liability. If the self-assessment is not timely paid the EDD may do one of several things:
- Send a letter to the employer demanding payment.
- Issue a Notice of Assessment for the specific quarter.
- Levy the employer’s bank account without warning.
If the employer stops filing quarterly returns, EDD computers will automatically generate quarterly Notices of Assessment based upon estimation. When this happens a petition with the CUIAB should be filed in a timely fashion followed by the employer preparing and filing an actual return for that quarter.
By far the largest assessments that are subject to enforced collection are the results of an audit. Audit assessments can be issued based upon an actual review of the employer’s books and records, or can be based upon an estimation when the EDD deems the employer uncooperative or unresponsive.
When the audit is completed, or when the auditor just throws up his/her hands in consternation, a Notice of Assessment is issued. These days assessment notices are sent by certified mail. An employer has only 30 days to file a petition with the CUIAB. If no petition is filed, the assessment becomes final and subject to collection. It is then assigned to a collector who can levy your bank account or garnish wages without warning.
Unfortunately we are seeing EDD assessment notices that never get delivered to the employer or the employer’s representative. To prove that the Notice of Assessment was issued, the EDD will only show you a copy of Post Office Form 3800 showing a bar code tracking number. Going online to the USPS tracking site, will reveal that there was no delivery. This creates one hell of a mess and stress beyond belief. You are going to have to attempt to convince the EDD to release the levy and other enforced collection because you never received the Notice of Assessment. Just how you go about this, will be the subject of a future article.
Timely Petition Filed but Collection Continues
It’s rare but it happens. You file a timely petition after you received a Notice of Assessment. All of sudden the EDD has filed a tax lien against you and may have also levied your bank account. These actions are totally illegal. You should contact the EDD Taxpayer Advocate. The Advocate is very helpful in these types of situations. They can release the lien as well as any bank account levy. This is a case where the left hand of the EDD does not know what its right hand is doing.
The EDD does not levy a bank account without just and legal cause. Most of the time, the levy is justified. The taxpayer-employer has failed somewhere. Sometimes the right hand of the EDD does not know what its left hand is doing. Sometimes the post office is at fault. However, looking through the eyes of the collector the bill to the EDD is due and it is full speed ahead to enforced collection.
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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