ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – HOW TO DEAL WITH THE EDD BANK ACCOUNT LEVY FROM HELL
By Robert S. Schriebman
Receiving a letter from your bank telling you that all the money in your account has been levied by the EDD does not make your day. In fact, it may be one of the most stressful experiences you will ever have. The purpose of this article is to explain why these levies occur and what you can do to deal with a bank account levy.
EDD Levies and Why They Happen
“Why did this happen to me?” “What did I do to deserve this?” These questions are typical from the calls I receive. The usual call goes something like this, “Help! The EDD has just hit my bank account without warning. I have been wiped out!” Why did this happen?
There are many reasons why the EDD levies a bank account:
- You have filed payroll tax returns but did not fully pay the amount due.
- You have been audited by the EDD, received a Notice of Assessment, but failed to timely file a petition with the CUIAB.
- You have an installment payment arrangement with the EDD that you have defaulted on your monthly payments.
- An EDD collector notified you in writing or called you, but you failed to respond.
- Failing to communicate with an EDD collector generates most enforced collection action.
- You have an EDD overpayment notice from your UI benefits.
No Warning from the EDD
When you owe the IRS, you will receive several written notices including a letter that says, “Notice of Intent to Levy.” You will then be afforded an opportunity to avoid any enforced collection action by filing a Collection Due Process (CDP) petition. You will have a right to an IRS administrative hearing and a right to go to Court, all without paying the IRS one dime.
The EDD is Not the IRS!
The EDD is not the IRS! The EDD is not required to give you any advanced warning whatsoever. In my practice, I am constantly dealing with EDD enforced collection action without prior notice. This fact of life means that you are required to be introspective and proactive at the same time.
Handling an EDD Levy
The EDD is not desirous of wiping you out financially. If you are in business and have a payroll to meet, or other high priority expenses, the EDD is prone to remove the levy completely or inform the bank to withhold a smaller percentage of the original levied amount. But this requires affirmative action on your part. When the EDD levies a bank account the bank is not required to turn over the funds immediately. The bank must hold the funds for a specific period set forth in the levy notice and this hold period allows you to contact the EDD.
The first thing you should do is to contact your assigned collector. I cannot emphasize this enough! The Taxpayer Advocate’s Office may be in a position to help you. You may be offered an installment payment arrangement in exchange for the total or partial release of your levied funds.
The Best Thing to Do – Hire a Professional
Perhaps no State employee is as powerful as an EDD collector. Collectors have complete and total authority and control over your levied funds. There is no CDP process as there is with the IRS. Experienced tax professionals, knowledgeable in EDD collection practice and procedure are the best people to handle this very stressful situation. A knowledgeable professional may be able to remove the levy and replace it with an installment payment arrangement or some other solution. The levy may also be removed or adjusted to allow the employer to meet payroll and other obligations. Occasionally an EDD levy is issued illegally. A professional is the best person to bring this to the EDD’s attention. The EDD will promptly remove any illegal levy.
Of course, professionals need to be paid for their services and very few if any will take on your matter without upfront compensation. Don’t expect the professional to help you on a promise that they will be paid if and when the levy is removed.
An EDD bank account levy is very stressful. It requires immediate action, but it also requires an introspective self-examination as to why the levy happened in the first place. Very few EDD levies are improper and illegal. The EDD acts to correct this type of error promptly upon being notified. The best way to avoid any type of enforced collection action is to either fully pay the assessment or to communicate with the EDD early in the collection process. Solving enforced collection issues and working out an amicable solution is best left to knowledgeable professionals.
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.
Web Site Article 769