ASK THE EDD ATTORNEY – THE EDD GIVES UP! – ABANDONS ITS EFFORTS TO STOP THE CUIAB FROM HEARING WIRP REFUNDS
By Robert S. Schriebman
On July 18, 2017 I appeared before ALJ Peter J. Wercinski to put forth my argument that the CUIAB’s position of not granting administrative review on Worker Information Return Penalty refund matters was essentially unconstitutional. The EDD, on the other hand, argued that there is in place currently a statutory framework that protects the rights of small employers by allowing them to have a refund hearing in the Superior Court. In the closing days of July, Judge Wercinski published his opinion. You, the California employer-taxpayer won. The CUIAB’s old position was wrong. This was indeed a landmark victory!
However, shortly after this victory, the EDD filed an appeal with the Appellate Division of the CUIAB in an attempt to keep things the way they were.
On September 17, 2017 the EDD served notice that it was withdrawing its appeal. My earlier landmark victory stood.
This article will discuss what this important win means to you, the California employer-taxpayer.
Those of you loyal readers, who follow these articles, know what WIRP means Worker Information Return Penalties assessed pursuant to CUIC §§ 13052 and 13052.5. These are tough penalties for the failure to either issue W2s or 1099s, or for falsifying these forms to show lower wages and contractor payments. Under section 13052.5(d), once these penalties are assessed they are immediately assigned to a collector. This usually means bank account levies without warning and the filing of a damaging Notice of State Tax Lien. The lien does not come off until the WIRP with its accruing interest is paid in full. This can literally take years. If an employer wants to make monthly installment payments, he/she is at the mercy of demanding tax collectors.
Unlike other employment taxes there are no prepayment administrative hearing rights. This will all change on January 1, 2018 as subsection (d) has been repealed. It is hoped for the final quarter of 2017, and in the interest of taxpayer goodwill, the EDD will not require post assessment payment.
The repeal of subsection (d) will also mean that starting January 1, 2018 WIRP assessments may be settled through the EDD Settlement Office in the same way that all other parts of assessments have been historically settled.
With regard to post payment refund matters, the CUIAB has historically interpreted subsection (d) as preventing any type of administrative hearing for refund matters. In other words, up until my victory, it’s been “hands-off” on all WIRP matters as far as the CUIAB was concerned.
This “hands-off” position forced small and medium sized businesses to bring their refund matters before the Superior Court. Not only is this time consuming and very expensive, but Superior Court judges, as a group, hate hearing tax cases. Let me give you a first-hand experience: many years ago I was called to testify as an expert witness on an FTB refund matter. The hearing was set for 2:00 pm and we arrived at the court early. The clerk went into chambers to inform the judge that we were all present. The judge asked the clerk what type of matter was calendared for hearing. When the clerk replied, “A tax matter, your honor,” the judge cried out in horror, “A tax matter, I don’t want to hear a tax matter!” After brief oral arguments by both attorneys, the judge found a way to throw the case out of court on a technicality. I never did get a chance to testify.
Because of all the obstacles facing an employer-taxpayer seeking refund justice in the Superior Court, and finding not enough justice to go around, it seems to me that forcing you, the employer-taxpayer to go to court is, in reality, legalized theft under our current system of justice.
All of this injustice is now about to change. Starting January 1, 2018 you will not have to pay a WIRP assessment as soon as it is issued. You will have full administrative appeal rights and the ability to settle your matter with the EDD and keep the IRS away at the same time. If you elect to pay the WIRP assessment you will have full administrative refund rights as they have been in place for years.
It is important that you understand that WIRPs have not been repealed. There will still be plenty of WIRP assessments as employers try to skirt the law. What has been repealed is the involvement of the tax collector. No longer will you have to fear a bank account levy with no warning. No longer will you be burdened by an unfair premature tax lien.
WIRP assessments are harsh, terrifying, and have been applied in an unfair manner by the EDD. The EDD knows that once WIRPs are assessed the employer most likely will never get a refund. WIRPs have been a cash cow to the EDD and the State Treasury. But the times they are a changing. It is going to be interesting in 2018 to see what the EDD Settlement Office and ALJs will do to create a level playing field and to insert fairness and objectivity into WIRP assessments.
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.
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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