ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – HOW TO MAKE SURE YOUR EDD PETITION IS TIMELY
By Robert S. Schriebman
One of the most important things that I have learned in over 50 years of the practice of tax law is to pay very close attention to timeliness. Time limits and statutes of limitations govern tax assessments and challenges to those assessments. The most important rule that a tax auditor learns from day one is to protect the statute of limitations. Many people under audit are more concerned with making a good impression on the auditor than filing a timely audit appeal.
What are the consequences of filing a petition or an appeal too late? Tardiness usually means that the assessment must now be paid in full before it can be challenged. Tardiness means you have to go the extra steps in timely filing a claim for refund and a timely appeal if your claim is rejected. In other words, there are more hoops that you have to jump through, including having to pay the tax bill.
This article will discuss how to protect yourself from an EDD assessment by filing a timely appeal or petition with the CUIAB. I will discuss the dates to look for on a Notice of Assessment (NA) and the difference between a Proposed Notice of Assessment (PNA) and a final NA. I will then discuss the basic rules relating to filing a timely assessment and what happens if the petition is late.
PNA vs. NA
Assessments by the EDD usually come about as a result of an audit. In 2021, I am seeing many assessments that are computer-generated and are not the result of any actual examination. They are based upon estimations. Regardless of the circumstances triggering the assessment, a timely petition must be filed with the CUIAB to prevent the assessment from going into default. A defaulted assessment usually means that the tax bill must now be paid in full. If not fully paid voluntarily, your account will be turned over to an EDD collector for enforced collection action.
After full payment, you must file a timely claim for refund and a timely refund petition once your claim is denied.
If you are subjected to an audit, instead of a computer-generated NA, you will initially receive a Proposed Notice of Assessment (PNA). When you receive a PNA read it carefully, especially the notes at the bottom of the statement. The PNA will tell you that it is not a final bill and that no petition is required to be filed. A final NA will soon follow and will be sent by certified mail.
Caveat: It is important for you to be on the lookout for the certified NA. There are important time limits on the NA. If you are notified that a certified letter is waiting for you at the post office, go get it. Don’t neglect it.
Reading the NA
There are two important dates on the upper right-hand corner of the NA: the Issued Date and the Mail Date. A period of about 7 days separates the two dates. A timely petition is governed by these two dates. You have 30 days to file a timely petition.
Caveat: It is important that you be able to prove that you filed your petition timely. You have the burden of proving timeliness. If you are going to use the mail, go to the post office and send it by certified mail and make sure the clerk round-stamps your receipt. You must be able to prove that you deposited the petition timely. The petition may get lost in the mail or arrive at the CUIAB late, but as long as you can prove a timely deposit you are OK. You can also use private carriers like Fed Ex or UPS (something that shows tracking).
The Important 30-Day Rule and How to Calculate It
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. The 30 days will be measured from the Mail Date on the NA. 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 or other actions of the EDD creating an estoppel.
In Precedent Decision P-B-115 the appeals board set forth the elements of equitable estoppel as follows:
- The Employment Development Department, or its authorized representative, was apprised of all the facts.
- The department intended the claimant to rely on its conduct or statement or led the claimant to believe he or she could rely on it.
- The claimant was ignorant of the facts.
- The claimant relied on the department, or its authorized representative’s conduct or statement, to his or her injury.
The 30-day rule may very well be the most important date of all when it comes to an EDD audit or a computer-generated assessment. If you file the petition after the first 30 days, it will be deemed late. It is a mistake to calculate timeliness within 60-days of the date of the NA.
If you are late in your filing, you will have to undergo a judge hearing and you will have the burden of proving that you have good cause for filing late. Judges do not like tardiness.
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 532