ASK THE EDD LAWYER- IS THERE ANY WAY OF FIGHTING THE EDD WHEN THEY TRY TO COLLECT AN OLD DEBT? Part II
by Robert S. Schriebman
This is Part II of a 2-part article discussing the EDD’s ability to legally collect ancient deficiencies. In Part I we took a historical overview and discussed the nature and power of an EDD tax lien. In Part II we will discuss methods of fighting back when the EDD claims you owe them money from decades past.
We know from Part I that the Franchise Tax Board has a 20-year collection statute of limitations for old debts. The EDD does not have any statute of limitations for collection other than a provision in the California constitution declaring debts owing to the State of California become unenforceable after 30 years (Article 12 § 30 of the California State Constitution).
What avenues are available to you to fight back when the EDD demands the payment of a debt that is more than 10 years old? The following suggestions are by no means exhaustive:
- Ask for Your Records
The chances are that the EDD collector contacting you is looking at your data on a computer screen. He or she is not sitting with your original assessment documents and other relevant paperwork showing how your debt to them was established. Do not just take the collector’s word that you owe the EDD. Ask for the collector’s name and address. Send a letter asking for true copies of your assessment documents, your files, and all records relating to your deficiency. You may be surprised at the results you find – – – or do not find. There may be no records, or they may be documents that will prove that the EDD’s collection efforts are now barred by rules relating to due process for assessments. Due process requires that the EDD should have originally given you notice of any potential assessment against you. You may have to hire a lawyer to fight off the EDD, but if you can prove that the assessment and debt is now illegal and can not be collected it is worth the cost of representation.
- There May Be Errors in the Original Assessment Process
There are provisions in the California Unemployment Insurance Code (CUIC) that require the EDD to send assessments by certified mail. All assessments must be sent to a taxpayer’s last known address. If the EDD fails to follow the rules any resulting assessment may be invalid. By the time the collector gets to you it is too late to redo the assessment process correctly the assessment of yesterday may be statute barred today. These rules come into play for individuals who operated now-defunct corporations or LLCs. There are strict rules on time limits for individual-level assessments and strict requirements that the EDD send these types of assessments to ones proper address. It is very important to request copies of your files from either the assigned collector or the EDD Taxpayer Advocate. I have found that the Advocate’s Office is very helpful in providing this type of documentation. If the EDD did foul up on the assessment process you may have a right to file a petition to challenge the assessment, even after the passage of many years.
- Penalty Abatements
Substantial portions of old assessments are composed of delinquency penalties and accruing interest on those penalties. Penalties and interest may be abated for good cause. They may have been an illness or a family tragedy that caused you not to file a return or pay your taxes. There may have been embezzlement by a trusted employee, and you may have a police report. These penalties may be removed and the interest too. The process is called abatement. Usually it starts with the assigned collector. Your request should be in writing. There is a long list of accepted excuses and reasons for abatement contained in the Internal Revenue Manual (IRM). You can go on the IRS web site and download the IRS criteria for “reasonable cause.”
- Offer in Compromise (OIC)
Like the IRS, the EDD has an OIC process. To be eligible to submit an offer your prior business must no longer be operating. You can not have any criminal convictions against you for EDD violations. The EDD web site has the forms and instructions for you to download. If you do not have the ability to fully pay the ancient debt you may be eligible to submit an OIC and resolve the matter fully and completely for pennies on the dollar.
An EDD attorney, 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 lawyer, 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 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