EDD Installment Payment Arrangements
By Robert S. Schriebman
I always advise people who owe taxes and have the ability to full pay what they owe to pay their tax debt as soon as possible and get the tax man out of your life. Do not play games with the system. It will beat you every time. You are better off going to Las Vegas and trying to beat “the house” than to play payment avoidance games with the EDD.
If you owe the EDD you may be able to take advantage of the EDD’s Installment Agreement Program. The EDD recognizes that there are situations where it is in the best interests of both the taxpayer and the EDD to accept an installment agreement to liquidate tax deficiencies.
If immediate full payment is not possible, and you are current on your employment tax filings and payments, contact the EDD collector and ask for information about making installment payments. The EDD will send you a package consisting of financial statement forms for both an individual and business together with instructions. You can also go on the EDD web site and download these forms from: www.edd.ca.gov/pdf_pub_ctr/de927b.pdf. If you do not have an assigned collector consider contacting the EDD Taxpayer Assistance Center (888)745-3886 or from the EDD web site at: www.edd.ca.gov/Pyroll_Taxes/Forms_and_Publications.htm#Forms. They may be able to assist you by assigning your account to a collector who will work with you. I have found most EDD collectors to be reasonable and cooperative. Sometimes it takes them several weeks to get back to you after receiving your financial statement. When submitting a financial statement do not forget to also supply the EDD with the most current six months of bank statements.
There are two types of EDD payment arrangements – short term and long term. Let us spend a few minutes discussing each type:
Short-Term Installment Agreement
The EDD looks favorably upon a short-term installment agreement. The liability must be satisfied as quickly as possible. In EDD language this means twelve months or less. The EDD will require a good-faith up front payment and the filing of all delinquent payroll tax returns such as the DE6, DE7, and DE88 returns. You may also be required to complete either an individual or business financial statement. The EDD will also ask you to sign a formal installment agreement.
Long-Term Installment Agreement
Long-term agreements are not as easy to obtain as short-term agreements. In deciding the length of time of this type of agreement the EDD will consider whether you are an “in-business” taxpayer. An in-business taxpayer may be allowed up to twenty-four months to pay off the deficiency. An out-of-business taxpayer may be given longer than twenty-four months. You will be required to complete and submit an individual or business financial statement together with your last six months of bank statements. As with the short-term arrangement, all delinquent payroll tax returns such as the DE6, DE7, and DE88 returns must be filed. The EDD will also ask you to sign a formal installment agreement.
A corporation, limited liability company (LLC), and limited liability partnership (LLP) will be required to complete a Corporate Information Questionnaire (DE204). This form may be used by the EDD to assess responsible individuals pursuant to CUIC § 1735.
Once a payment arrangement is reached the plan will remain in effect for the period negotiated unless you:
- Fail to make payments as agreed. This includes nonpayment, late payment, paying less than agreed, or checks returned by your bank unpaid.
- Incur additional liability after the agreement is negotiated. Additional liability usually arises because you do not pay current taxes. This condition would not apply if the additional liability results from a nonfraudulent assessment covering a prior period.
- Fail to file all required reports and/or DE88s on a timely basis without good cause.
- Are found to have intentionally provided false, materially inaccurate or incomplete information. This does not apply to simple mistakes.
NOTE: Failure to meet the terms of the installment agreement may result in involuntary collection action, including but not limited to seizure and sales of assets.
There is a price to pay for either short-term or long-term installment agreement: 1) Interest continues to accrue and compound on the unpaid balance; 2) The EDD may file a Notice of State Tax Lien until the liability is paid in full.
©Robert Schriebman 2013.
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.