ASK THE EDD LAWYER – EDD INSTALLMENT AGREEMENTS – WHAT YOU DON’T KNOW CAN HURT YOU
By Robert S. Schriebman
March 17, 2016
When you owe the EDD you will receive a Statement of Account that sets forth in detail the taxes, penalties, and interest on a quarter by quarter basis. The Statement may be followed by a call from your assigned EDD collector or a Notice of State Tax Lien. It is a mistake to ignore or attempt to avoid EDD collection efforts.
In this article I will discuss the types of installment payment agreements that can be arranged with the EDD, and discuss some hidden traps that could cause your EDD installment agreement to become defaulted. You will learn that communication can be your best friend when dealing with EDD collection matters.
EDD Financial Statements And Installment Payment Arrangements
The EDD historically has maintained two types of financial statements: one for in-business taxpayers and the other for out-of-business taxpayers. EDD financial statements, when compared to those of the IRS and FTB, are shorter and simpler to complete. Both the IRS and the FTB demand all sorts of supporting backup documentation. The EDD however, usually just wants copies of the most recent six months of bank statements. One does not need a CPA to help complete either EDD financial statement versions.
The IRS, by rule of thumb, wants the taxpayer to pay the tax debt over a 60-month period. The EDD is not as generous. In-business taxpayers can get up to 18 months, and in rare circumstances up to 24 months to pay what is owed. Out-of-business taxpayers are given a longer payout. This may not be as harsh as it seems for in-business taxpayers as the amount owed to the EDD, when compared to the amount owed to the IRS, is relatively smaller.
Having said the above, EDD collectors also understand that there are circumstances that require longer payouts. Every taxpayer’s situation is unique.
What To Do If You Have No Assigned EDD Collector
EDD collectors are overworked. An EDD collector usually has more cases than he or she can handle. Your matter may not be assigned to a specific collector, but you want to arrange an installment payment plan and avoid enforced collection action. In that event, be proactive. Contact the EDD Taxpayer Advocate and request that your matter be assigned to an EDD collector.
What To Do If You Cannot Make Your Monthly EDD Installment Payment
As I said in the introduction of this article, communication can be your best friend. If you cannot make an EDD installment payment, or you cannot pay the full payment, don’t avoid the issue. Pick up the phone and call your assigned EDD collector and explain the situation. The chances are excellent that your collector will work with you. In this way you will avoid defaulting your installment agreement and avoid your exposure to a bank account levy or wage garnishment.
Whether you have an EDD, FTB, BOE or IRS installment agreement, you are required to keep current. It’s all about payroll tax compliance. This means that you must make your tax deposit payments on time as well as file and pay your quarterly tax requirements on time. Keeping current is more important than making your monthly installment payment. If keeping current means you are going to totally miss a monthly payment or not be able to make the full monthly payment, you must inform your assigned collector in advance. The collector will want you to be current and will work with you on making your monthly installment commitment.
If you are not current, you will have made a technical default on any pre-existing installment payment agreement.
Of course, out-of-business taxpayers do not have to concern themselves with the requirement of keeping current with payroll tax compliance. However, they must still communicate with their assigned EDD collector if they are going to miss altogether their monthly payment or cannot make the full monthly payment
Installment Agreement Defaults
There are many ways an installment payment agreement can be defaulted. The three most common are the failure to keep current, missing an installment payment entirely, or being late on your installment payment.
Regardless of whether you are an in-business taxpayer or out-of-business taxpayer, a defaulted agreement means that the agreement, at the option of the EDD, may be revoked and terminated. Remember, an EDD installment payment agreement is a privilege; it is not a right.
If the EDD elects to default your installment agreement, you will have to go through the process anew from the very beginning. This usually means requirement of preparing a new financial statement with new and updated supporting documentation. If your financial situation has improved, you could wind up with a higher monthly payment!
A defaulted agreement can lead to enforced collection by the EDD such as a bank account levy, wage garnishment, or placing a keeper in your business establishment.
Granting you an EDD installment payment agreement is a matter of grace from the EDD. It is important to be and remain current on your payroll tax compliance. If you have any problem meeting your required monthly installment commitment, the worst thing you can do is to pretend the problem does not exist. Communication with your assigned EDD collector is vital if you are experiencing any difficulty in making any installment payment.
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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