ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – IS THE EDD GETTING STINGY WITH SETTLEMENTS?
By Robert S. Schriebman
If you are a reader of this website, you will have come across several articles discussing the EDD’s settlement procedures and the fact that I have been an advocate of this settlement process for many years. This article will discuss the settlement process, past and present, as well as what some of my colleagues have recently experienced in their dealing with the EDD Settlement Office.
The Historical Advantages of the EDD Settlement Process
The settlement process starts after the timely filing of a petition with the CUIAB. The petition can be the result of contesting an EDD audit assessment or a petition filed after a filing for claim for refund. The process is initiated by contacting the EDD Settlement Office and requesting that they take jurisdiction over the pending petitioned matter. Once the Settlement Office agrees to entertain a settlement, it will send a letter of acknowledgment and will notify the CUIAB to take the case off of the hearing calendar.
The settlement process is no quick thing. The Settlement Office is a small organization with a substantial inventory of cases. It is not unusual to receive an initial settlement proposal after the passage of six months or longer.
A settlement means that the employer will have to pay the EDD. There is no such thing as a freebie. Settlements may be paid either in one lump sum or in installments of up to eighteen months. Longer payment arrangements will require the submission of financial disclosures. If you elect to pay in installments, you will be subject to a 15% late penalty and interest on the unpaid balance at the current rate of 3%.
There are many advantages to engaging in the settlement process. Settlement means avoiding a potentially expensive and risky judge hearing. Settlement results are not reported to the IRS so there is little risk of an IRS “Me Too” assessment. If you do not like the EDD’s settlement proposal, you are welcomed to take your case before the CUIAB for a judge hearing on the merits.
These are the historical advantages of undertaking an EDD settlement.
Is the EDD Getting Stingy with Its Settlements?
Several colleagues have informed me that they are disappointed with the latest EDD settlement proposals. One informed me that the EDD offered only a 5% discount from the original assessment. A second colleague informed me that when an installment payment arrangement was requested, the 15% penalty brought the settlement within a few dollars of the original assessment. A third colleague informed me that the EDD refused to discount one dollar!
I telephoned my source at the EDD and learned that indeed EDD settlement policy has tightened up due to the impact of AB5 and the resulting ABC Test. The EDD now feels that the hazards of litigation are on the side of the employer and if the EDD took the case to trial, the odds of prevailing are now greater in the post COVID era. It is going to be much more difficult for an employer to argue that service providers are not an integral part of their business model. Having said this, the fact that EDD settlements are not available to the IRS remains a huge positive factor in electing the settlement process.
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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