ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – YOU MUST FILE A PETITION EVEN IF YOU WERE NEVER AUDITED
By Robert S. Schriebman
If you receive a Notice of Assessment from the EDD you must timely file a petition to protect your future rights. This must be your highest priority. Even if you were never formally audited by the EDD. The sad case of Mrs. Jones, discussed below makes this very clear.
The Sad Case of Mrs. Jones
Mrs. Jones is not her real name. One day Mrs. Jones received a Notice of Assessment from the EDD. It was sent by certified mail. Mrs. Jones’ company was never audited by the EDD. The assessment was huge – $300,000! Along with the Notice came a form letter telling her that she had ten days to call the EDD Audit Office if she had any questions. The letter further instructed her to speak with a Mr. Smith. A phone number was provided.
Mrs. Jones immediately called Mr. Smith who turned out to be a group manager. She asked for an explanation and told Mr. Smith that she did not understand why she received the assessment. Mr. Smith responded by telling her, “Don’t worry about the assessment; we will give you a new audit.” (Keep in mind that Mrs. Jones was never audited in the first place!)
Over the course of the next month, Mrs. Jones placed several calls to Mr. Smith asking about the time and place for the audit. Eventually Mr. Smith called back and informed her that Mr. Brown would be her assigned auditor.
A couple of weeks later, Mr. Brown called Mrs. Jones to tell her that the audit would occur on Monday, February 18, 2019 at 10:00 am. He also told her what books and records were required of the new audit. Mrs. Jones arrived at the EDD on that date together with her books and records. Mr. Brown reviewed everything and told her he would get back to her.
On March 4 Mr. Brown telephoned Mrs. Jones to tell her that he is affirming the original assessment but she would soon receive a new Notice of Assessment with all appeal rights restored. Sadly, Mrs. Jones never received a new assessment.
Because Mrs. Jones never filed a petition in response to the original Notice of Assessment, that assessment became final and subject to collection. Mrs. Jones now owes the EDD over $300,000 because she relied upon Mr. Smith’s statement “Don’t worry about the assessment; we will give you a new audit.”
What To Do?
Mrs. Jones is in a mess. She relied on false promises from Mr. Smith and Mr. Brown. Unfortunately, I have heard this story before. Mrs. Jones will now have two options:
1) Pay the assessment and go through the refund process, or
2) File a late petition and throw yourself on the mercy of a CUIAB judge. (An EDD collector is allowed to collect the defaulted assessment while this matter is pending before the CUIAB.
Mrs. Jones’ story has a valuable lesson: if you receive a Notice of Assessment, file a timely petition with the CUIAB no matter what! Do not rely on any promises from the EDD that they will cancel the assessment. The chances are that this will not happen. Most EDD auditors are responsible and honest. They care about how a taxpayer is treated during the audit process. However, some auditors may deliberately mislead a taxpayer into a false sense of security. When this happens, it is an uphill battle, and an expensive one, to try to rectify the wrong that has been done to the taxpayer. The lack of accountability within the EDD leaves much to be desired.
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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