ASK THE EDD LAWYER- WHAT ARE THE INSTALLMENT PAYMENT ARRANGEMENTS CURRENTLY OFFERED BY THE EDD FOR THE PAYMENT OF DELINQUENT PAYROLL TAX DEFICIENCIES? PART I
by Robert S. Schriebman
This is Part I of a two part series discussing the latest developments in negotiated EDD installment payment agreements.
If you or your business owes the EDD delinquent withholding and employment taxes you may be able to take advantage of one of three “in place” installment payment programs currently being offered through the EDD Collection Division. These agreements are usually set up through an assigned EDD Collector. The first agreement is referred to as a “Short-Term Agreement – Up to 12 Months.” The second agreement is referred to as a “Long-Term Agreement-Greater than 12 months – up to 36 months.” The third agreement is referred to as a “Non-Standard Installment Agreement.”
Regardless of the type of agreement that is right for you, your assigned collector will review your past EDD history to determine if you have previously defaulted on any prior installment agreement. If you are an in-business taxpayer during the term of the agreement, you must keep current on your EDD payroll tax compliance. This means you must file your quarterly and annual returns on time and timely pay what is owed on each return.
This article will discuss both types of agreements and the documentation and information required to establish each type of agreement.
Short-Term Agreement – Up to 12 Months
This program is for relatively small deficiencies. If you are an in-business taxpayer owing less than $25,000 or an out-of-business or inactive taxpayer owing $10,000 or less, this program is designed to allow you to pay off your EDD deficiency over a 12 month period. Usually a financial statement must be submitted for this type of agreement. The EDD has two basic financial statement forms that you may obtain off the internet. Form DE 926B is for individuals or sole proprietorships and Form DE 926C is for a business entity such as a corporation or LLC. In addition to submitting a financial statement, you must also submit copies of the last six months of personal or business bank statements.
Be Careful: Do not submit original bank statements to the EDD. Copies only. You may not see these statements again.
The financial statements will be reviewed by the assigned collector or the collector’s manager. No installment payment will be given if you have a history of delinquencies. A short term agreement will not be granted if you have been found to be a fraudulent taxpayer.
Longer Short Term Agreement if You are Audited.
The EDD also has another short term payment arrangement for assessments that are the result of an audit. If you have an audit assessment, you get up to 18 months to pay off your deficiency. You must inform your assigned collector that the deficiency is a result of your being audited.
Interest Continues to Accrue
An installment payment agreement is similar to a bank loan in that the EDD will charge you accruing interest on your unpaid balance. You may find that at the end of your payment term, you still owe the EDD accruing interest. In my practice I find that many clients are taken by surprise when they learn that they have to pay interest on their outstanding balance.
In Part II, we will discuss long term payment agreements and non-standard payment agreements.
©Robert Schriebman 2013.
An EDD attorney, Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angles County serving clients throughout California and the United States. As a trusted EDD lawyer, Robert 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 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.