ASK THE EDD LAWYER – Is the EDD Allowed To Collect a Tax Assessment While An Appeal Is Pending?
By Robert S. Schriebman
Is the EDD allowed to collect a tax assessment while an appeal is pending? Generally speaking, the EDD is not allowed to take any type of collection action, including the filing of a tax lien, while a timely filed matter is pending before California Unemployment Insurance Appeals Board (CUIAB). But there are exceptions. Let us discuss the general rule first, and then we will discuss the very limited exceptions.
This article will discuss your rights to stop EDD collection action when a timely filed petition is pending before the CUIAB. It is another matter entirely to try to stop the EDD from undertaking collection action while a late-filed petition is pending. This lies within the discretion of the assigned EDD collector.
The General Rule – No Collection Action Allowed
When the EDD completes an audit and issues a Notice of Assessment the taxpayer is allowed a 30-day time limit to file an appeal challenging the assessment before the CUIAB (there is an additional 30-day grace period if a judge allows the late petition). The usual EDD Notice of Assessment consists of four (4) categories of employment taxes plus penalties if the taxpayer failed to file returns or to pay the assessment in full within ten (10) days. Sometime, however, the right hand of the EDD does not know what its left hand is doing, and the EDD may file a Notice of State Tax Lien or issue a bank account levy. Assuming that the petition was timely filed it is improper for the EDD to take any collection action while the petition is pending.
What to Do If the EDD Is Illegally Collecting the Assessment
If you have timely filed a petition challenging a Notice of Assessment, but you are faced with improper EDD enforced collection action, I recommend that you contact the EDD Taxpayer Advocate for help. You can find them on the EDD web site www.edd.ca.gov. You may telephone the Advocate or contact them by fax. I can not say enough good words about the fine people working in the Advocate’s office. I have always received prompt attention whenever I have contacted them. They take immediate action to look into my issue and to try to solve the problem. They will do the same for you. The Advocate is very helpful in putting a stop to enforced collection action during the pendency of a timely filed petition.
When is the EDD Allowed to Collect During the Pendency of a Timely Filed Petition?
At the beginning of this article I told you that there were limited exceptions that allow the EDD to take collection action even though you have filed a timely petition to challenge the EDD Notice of Assessment. There are two (2) penalties that the EDD assesses against a taxpayer when the EDD takes the position that the taxpayer is an employer who failed to timely issue 1099s and W-2s to workers and failed to file 1099s and W-2s with the IRS and the FTB. Sections 13052 and 13052.5 of the CUIC provide stiff penalties for noncompliance. The law clearly states that once the EDD assesses these two (2) penalties the taxpayer is not entitled to any type of prepayment due process. Rather, the EDD is immediately entitled to assign the collection of these penalties to a collector who is at liberty to legally file tax liens and to undertake enforced collection action such as a bank account levy.
Things Can Get a Bit Confused
What happens in this situation is that the EDD is not allowed to collect any portion of the usual taxes assessed in an audit while a timely petition is pending, but at the same time is allowed to collect the 13052 and the 13052.5 portions of the Notice of Assessment. Things can get very confusing, and we find ourselves having to explain to perplexed taxpayers that the EDD is in their rights to collect these penalties but not the rest of the assessment.
Paying the Penalties and Filing a Claim for Refund
Once the penalties pursuant to CUIC § 13052 and § 13052.5 are paid in full either through voluntary payment or enforced collection the CUIAB will automatically treat the full payment of these penalties as a claim for refund as part of your timely filed petition on the rest of the assessment. You may then elect to have a hearing before a judge or attempt to settle your case with the EDD Settlement Office. There is no need to file a formal claim for refund if you have previously filed a timely petition on the other parts of the assessment.
An EDD lawyer, Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States.
As a trusted EDD attorney, Robert S. Schriebman has successfully dedicated more than 30 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 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 and 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.