ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – WHAT IS THE EDD EMPLOYERS’ BILL OF RIGHTS ALL ABOUT?
By Robert S. Schriebman
The origin of the Bills of Rights is interesting. Long before the IRS enacted its first Taxpayer’s Bill of Rights, the EDD, administratively, decided to publish its own version. In the CUIC there is a section devoted to taxpayer’s rights. These laws are found in CUIC §§ 1231 – 1237. However, the enacted bill of rights has little if anything to do with your rights during the audit process and the collection process. The statutes CUIC §§ 1231 – 1237 are primarily devoted to the abatement of penalties and other minor administrative functions. Many years ago, the EDD published DE 195 – entitled The Employers’ Bill of Rights. It has gone through several revisions since its initial publication.
In this article I will give you an overview of DE 195 with a dose of my points of view.
EDD’s Employers’ Bill of Rights
Right to an Impartial Audit
Most of DE 195 is devoted to collection activities and very little to your rights during an audit. As far as these rights are concerned, you have a right to an impartial audit and a full explanation of the audit findings. You also have a right to be represented by a tax professional or anyone you choose, even your barber (which I would advise against!).
Bob’s Comment: While most auditors try to conduct a professional level objective examination, there are a few bad apples who make up their mind how they are going to treat the employer before the audit begins. They assess big bills with many penalties. I have seen too many examples of taxpayer abuse in recent years and I am always fighting with the EDD to demand that my clients receive that impartial, objective, and professional level treatment that every employer is entitled to.
Right to Request a Waiver of Penalty
The EDD has 14 different penalties available to assess against an employer. The most popular penalties are the negligence penalty, the failure to report penalty and two worker information return penalties. It is very rare to receive a Notice of Assessment that is penalty free. Penalties can be abated for “good cause.” This translates into reasonable cause. And reasonable cause translates into the conduct of business affairs by an ordinary prudent business person.
Bob’s Comment: There are many articles on this website that discuss the standards for the abatement of penalties.
Your Right to An Appeal
You have the right to appeal an audit assessment. You have a right to appeal the denial of UI benefits. You also have the right to appeal the denial of a claim for refund. The EDD does not have a formal administrative appeal process like the IRS. All appeals are filed with the CUIAB. If you have a disagreement with your assigned auditor or collector, your only avenue of appeal is to speak with his/her immediate supervisor.
Bob’s Comment: When speaking to an auditor’s supervisor, be prepared – it is rare that a supervisor will reverse the actions of a subordinate. The most important thing to keep in mind when appealing to the CUIAB, is to file your petition on time, and not late.
The Collection Process
A large portion of the text of DE 195 is devoted to people who owe taxes and need a resolution. There are provisions for requesting an installment payment agreement or for the filing of an offer in compromise.
There are also comments about what the EDD can do to you if you do not attempt to resolve your EDD debt. The EDD can file a Notice of State Lien or garnish your wages. They can also levy on your bank account which happens to be their favorite means of enforced collection.
Bob’s Comment: I have written 20 books that deal with IRS and California tax practice and procedure. I have books totally devoted to the collection of IRS and California taxes. There is one great lesson that I have stressed in all of these writings. The most important thing to remember when dealing with an IRS or EDD collector is communication. Most enforced collection actions result from the failure of the taxpayer to timely and effectively communicate with the assigned collector.
The EDD’s Employers’ Bill of Rights is a brief pamphlet. It cannot thoroughly discuss either the audit or collection process. If you have been notified that you have been selected for an EDD audit, the best advice I can give you is to get professional counseling at the very beginning. It is one of the best investments you will ever make and you will avoid much anxiety and grief. When dealing with an EDD collector, most important thing to remember is early and effective communication.
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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