ASK THE EDD LAWYER – THE EDD GIVES BAD ADVICE ON AN ESTIMATED ASSESSMENT
By Robert S. Schriebman
Recently a prospective client called and gave me his sad tale over the phone. While he was out of the county visiting a sick and dying relative, the EDD attempted to conduct a worker status audit. As the employer’s books and records were not produced, the EDD auditor made an estimated assessment and issued a Notice of Assessment (NA) for the years 2014, 2015 and 2016. The period for filing a CUIAB petition had also expired. The NA became final and was assigned to an aggressive collector. When the employer returned to his business, he telephoned the auditor and requested a re-audit or audit reconsideration. According to the caller the EDD auditor informed him that the estimated assessment was final, and that no second look would be allowed. He will have to pay the entire assessment, together with accruing interest, and go through the refund process.
Assuming that what I was told over the phone was accurate and truthful, I disagreed with the position taken by the auditor in refusing to reopen the examination.
This article will discuss whether the EDD is allowed to issue an estimated assessment and what your rights are if you are on the receiving end of an estimated assessment.
Does The EDD Have A Right To Issue An Assessment Based On An Estimation?
Many years ago the US Supreme Court ruled that IRS agents can estimate assessments because of their experience, skill, and training. Perhaps the EDD got wind of this decision. It is common practice for EDD auditors to issue estimated assessments if they perceive that the taxpayer-employer is not cooperative or if books and records are incomplete.
Having said the above, no one likes EDD estimated assessments. CUIAB judges do not like them either and will encourage both the employer and the EDD to reopen the audit so that an assessment can be based upon reality. From my personal experience in dealing with many EDD offices and auditors, an audit-reconsideration will be routinely granted and an actual audit favored over an estimated assessment.
Sometimes a request for an actual audit resulting from an estimated assessment can back fire. That is to say the re-audit may result in a higher assessment. However, this may not be a disaster in the making. If you want to challenge an assessment by seeking a settlement within the EDD, an estimated assessment is generally not settled. You will be encouraged to go back to the audit office for an actual audit resulting in an actual assessment. Settlements are allowed on audits, based on facts; estimated assessments are not settled administratively.
The EDD Employer’s Bill of Rights starts out by stating, “You have the right to an impartial audit and a full explanation of the audit findings.” Translated this means “Estimated assessments are not favored.”
If an EDD auditor or his supervisor refuses to grant a reexamination and wash their hands of the estimated assessment, there are things you can do to force the re-opening of the audit. This is where the Taxpayer Advocate Office can be of great help to you in convincing the audit office to re-open the examination. Estimated assessments are usually the result of an overworked auditor with more cases than he or she should handle. The system, generally speaking, does not favor estimated assessments. Judges and settlement personnel want to see actual audits based upon accurate data and accurate and complete books and records. Never take the refusal to open an estimated audit lying down.
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 318