ASK THE EDD LAWYER – WHEN IS A NOTICE OF ASSESSMENT DEEMED TIMELY FILED?
By Robert S. Schriebman
Upon completion of most EDD worker status audits, the taxpayer-employer can expect to receive a Notice of Assessment together with supporting schedules. There are usually three options available when this happens; (a) pay the assessment and be done with it; (b) seek a hearing before the CUIAB with an Administrative Law Judge (ALJ) and; (c) settle the matter with the EDD Settlement Unit. In order to take advantage of options (b) and (c), one must file a timely petition with the CUIAB.
The purpose of this article is to discuss the law and regulations relating to when a petition is deemed timely filed. Let’s look at two scenarios.
Scenario1: Acme Corporation receives a notice of Assessment issued on May 1, 2018 and files a petition with the CUIAB on May 28, 2018. The petition is sent to the CUIAB by an overnight courier service and arrives on May 29, 2018.
Scenario 2: Acme Corporation receives a notice of Assessment issued on May 1, 2018 and files a petition with the CUIAB on May 28, 2018. The petition is sent by USPS certified mail. The post office misplaces the petition envelope and it does not arrive at the CUIAB until June 11, 2018.
Scenario 3: The EDD begins an audit of Acme Corporation in late 2016. Acme is represented by John Jones, an attorney. Jones immediately gives the EDD his Power of Attorney with his business address as the new official business address of Acme. On Monday March 13, 2017, the EDD completes the audit and issues a Notice of Assessment (NA). The NA is sent to Acme’s old business address, and, for reasons unknown, is never received. The EDD never sent the NA to Mr. Jones. Mr. Jones obtains a copy of the NA on May 15, 2018 from an EDD collector. He files a petition with the CUIAB on May 16, 2018.
Question: Which of these petitions is deemed timely filed?
Answer: All of them.
In this article we will review and discuss the three scenarios and why each petition is considered timely filed.
Scenarios 1 and 2
The rules for the timely filing of a petition are set forth at CUIC § 1222 and Regulation 5007(d) of Title 22 of the California Code of Regulations. A petition for review or reassessment must be filed within 30 days of service of an NA. An additional 30 day period may be granted by a judge if a petitioner can show good cause. If a petition is not filed within the 30 day period, or within the additional period granted by a judge, the assessment is final. A final assessment means that it is subject to immediate payment or immediate collection. Once the assessment becomes final, an EDD Collector can use any legal means to collect the assessment including one or more bank account levies served without the requirement of giving the taxpayer any type of pre-levy notice. A Notice of State Tax Lien can also be filed without notice.
In Scenario 1, the petition was timely filed because it was given to a recognized overnight carrier and was delivered to the CUIAB within the 30 day period.
In Scenario 2 the petition was also timely filed because it was delivered to and in the hands of the USPS within the 30 days. The fact that it was temporarily lost in transit was not the fault of the taxpayer. Delivery to the USPS is deemed by law timely filed assuming that the petitioner can prove that it was timely deposited. This is why it is very important to have the certified mail receipt “round-stamped” by the post office showing when they actually received it. Some day some smart EDD attorney is going to challenge this by making the petitioner prove that the envelope actually contained the petition deposited in the mail.
Scenario 3 clearly shows that the NA was issued on March 13, 2017 but the petition was not filed until over 14 months later, on May 15, 2018. We can see that the statutory double 30 day period discussed above does not come into play. Therefore, the question is, may a petition filed well over one year from the date the NA was issued be considered timely filed? The rules and guidelines are not found in the statutes. Regulation 5052(e) allows judges to have discretion in the issue of timeliness if the EDD failed to send the NA to the petitioner’s last known address. If the petitioner was served beyond the usual timeframe, and promptly filed a petition within 30 days from the time the NA was actually received, an ALJ has the discretion to allow the petition to be timely filed – even 14 months after the NA was originally issued.
CUIC §1206(b)(1) requires that the notice (NA) be mailed to the employing unit or person as it appears on the records of the EDD. In this case the 30 day period does not begin to run until the NA is actually received. If the petition is not filed within that new 30 day period, the petitioner is out of luck. The assessment is deemed final and must be paid.
Attorney Jones immediately upon being retained gave the EDD his Power of Attorney that clearly stated Jones’ law office address was now Acme’s new business address. The EDD has an obligation to record that new address on its computer system. Despite this obligation, the EDD’s internal procedures break down and the EDD has a consistent history of failing to record any new or different address on its system. Because of this flaw, NAs are often sent to old or incorrect addresses. Even when a change of address is given, the post office only forwards mail for a few months thereafter.
A taxpayer-employer may eventually receive an EDD Notice of Assessment that has been improperly sent to the wrong address. When eventually received, it is usually way beyond the normal statutory period for filing a timely petition. That does not mean ipso-facto that it is too late to file a petition that may be deemed timely by an ALJ. These types of EDD errors should be challenged. If the challenge is successful, the amount stated on the Notice of Assessment does not first have to be paid before it can be administratively challenged or settled.
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.
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