ASK THE EDD LAWYER – IS A CORPORATE LEVEL EDD ASSESSMENT AN AUTOMATIC INDIVIDUAL ASSESSMENT?
By Robert S. Schriebman
April 30, 2015
Is a corporate level EDD assessment an automatic individual assessment?
If you owe taxes and have a tax lien recorded against you, the chances are that you have received many solicitation letters promising all sorts of things, but in reality delivering very little if any help at all. Recently I received a call from a person who became a client. We are helping this person work out his corporate debt with the EDD. My client informed me that he received several calls from supposed experts telling him that the EDD corporate level debt means that he is personally responsible for its payment. These unscrupulous scammers also told him that the IRS will soon be knocking at his door as a result of the EDD assessment.
This article will set the record straight and give you some insight into the bigger picture of an EDD corporate level or LLC level assessment.
A Corporate or LLC EDD Assessment Is Not An Automatic Individual Assessment
Not every EDD corporate or LLC level employee-independent contractor audit results in an individual assessment. As a matter of fact very few corporate level assessments are charged against individuals such as responsible corporate officers and others involved in the day-to-day fiscal affairs of the company. In reality the decision to go after responsible persons is made by the EDD collector and not the EDD auditor. The EDD Audit Report has a checklist of who should be the target of an individual assessment, but the final decision rests with the person assigned to collect the corporate debt. Often by the time the collector is assigned the case for collection, the statue of limitations has expired for most of the quarters involved in the original audit. However there are still cases where a collector acts in a timely manner.
The key statue for holding a responsible person liable for corporate level taxes is CUIC § 1735. This section basically states that any person within a corporation or an LLC who is responsible for the payment and reporting of employment and withholding taxes can be found responsible and charged with the entire corporate level liability. Unlike the IRS version under IRC § 6672, that only involves about 60% of the corporate liability, the EDD version is a 100% exposure. Therefore, if the corporation or the LLC owes the EDD $100,000, the responsible person’s exposure is the full $100,000; for the IRS it is about $60,000.
The Clock Is Ticking
Every type of tax assessment, including an EDD assessment, has a time limit. The EDD has only one statue setting forth the time limits for each and every type of assessment. The time limits can range from 3 years to 8 years depending upon many factors. The time limits however, do not automatically mean that an individual assessment is guaranteed. EDD collectors often issue CUIC § 1735 assessments that are either wholly or partially statues barred. Since the statue of limitations for an assessment is so fundamental, it can be challenged at any time during a petition proceeding.
IRS Involvement In EDD Assessments Is Not Automatic
It is true that the IRS and the EDD have long standing information sharing arrangements. However, this does not mean that the IRS gets involved with each and every EDD audit. It is difficult to say exactly what will peak the IRS’s interest in a specific taxpayer’s case.
Like the EDD the IRS too has its own clock ticking away. If the IRS is going to get involved in an underlying EDD matter, the IRS has to make sure that it has enough time to complete its examination and that the money and issues involved are worth their time.
I have little or no respect for scammers who try to make a dollar by scaring the public with bogus legal advice. What’s worse that these people have absolutely no expertise when it comes to helping you with your EDD matters. Often they just take your money and do nothing.
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.