ASK THE EDD ATTORNEY – WHAT CAN I DO WHEN THE EDD TAKES MY INCOME TAX REFUND
By Robert S. Schriebman
February 19, 2015
We have received several calls from our web site readers complaining that the EDD has intercepted and taken their IRS and FTB income tax refunds for old debts owing to the EDD. Naturally, this has taken its toll on the plans of these readers who anticipated using their income tax refunds for various purposes. The actions of the EDD have also caused these readers a great deal of stress, disappointment, and anger.
This article will give you some guidance into the avenues available to you to work within the EDD for a possible whole or partial release of these intercepted refunds.
The EDD has arrangements with the IRS as well as the FTB and SBE to “offset” refunds when the EDD is owed money. The technical name is known as the Refund Offset Program. Refunds may also be taken when back child support is owed.
First Things First – Do You Owe The EDD?
If you owe taxes whether those taxes are owed to the EDD, IRS, FTB, or SBE, each agency has a right to collect that tax debt. If the debt is not paid voluntarily these taxing agencies can take what is owed to them by enforced collection such as a wages garnishment, bank account levy, or refund offset. Therefore, the first thing that you have to determine is whether you owe the EDD.
Admittedly, the EDD is taking IRS and FTB refunds for old debts – some as old as fifteen or more years. When you consider that interest on these old debts has been compounding daily the debt gets large very fast. Therefore, when you think you have paid off that old EDD debt there may be penalties and interest that accrued over the years. Interest is assessed not only on the tax portion that is owed but also on the penalty portion. If interest is compounded daily there is also interest on interest!
You have to start at the beginning and figure out how much you owe. Hopefully you will have EDD billings such as set forth in the EDD’s Statement of Account. You might also have a Notice of State Tax Lien. You can use these documents as a starting point. Next, have a record of all payments made including the fronts and backs of cancelled checks.
Contact The EDD Taxpayer Advocate
You can contact the EDD Taxpayer Advocate by going to the web site for the California Employment Development Department. Both the phone and fax numbers of the Advocate are available. The Advocate will assign someone to obtain your records to determine if the EDD acted properly in ambushing your tax refund. Sometimes old EDD records have been destroyed, and there is only a computer record remaining. In that event, you have the burden of proof to persuade the EDD that you do not owe all or a portion of the old debt.
If the EDD records show that you owe the EDD, and you have nothing to rebut or disprove the Advocate’s findings, you owe the EDD! Their records are presumed to be correct.
You may be able to persuade the Advocate that you need all or a part of your tax refund for vital expenses such as medical bills, child support, or to pay your employees. In that event you will have to prove these points to the EDD – they will simply not take your word for it.
File A Claim For Refund
If you believe the EDD was wrong in taking your income tax refund and you cannot convince anyone within the EDD to release all or a portion of the intercepted refund you should consider filing an EDD Claim for Refund. These rules are set forth in CUIC §1178. Refund claims must be filed within sixty (60) days of the time the EDD intercepted your refund. The claim must be in writing and sent to the EDD by registered or certified mail, return receipt requested. The EDD may assign someone to work with you on returning your refund.
Contact An EDD Collector For An Installment Payment Arrangement or Offer In Compromise
A refund offset notice is a wakeup call telling you that you owe the EDD and to work out a solution with an EDD collector. You may be able to persuade the collector to release all or a portion of your refund in return for an installment payment arrangement. There are no guarantees that an EDD collector will release the refund. They understand that a bird in the hand is a very important thing to have – but if you do not ask for a release of your refund you will never know whether you will be successful. The collector will want you to complete an EDD financial statement as well as furnishing your most current six months of bank statements. An in-place installment agreement may prevent the EDD from intercepting future refunds.
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.
Web Site Article 161