This office does not handle:

  • Unemployment Insurance Benefits (UI)
  • State Disability Issues (SDI)
  • Worker Compensation Issues
  • EDD Overpayments

Over 50 Years In Practice
Over 500 Articles

The EDD & Transferee Liability: Personal Liability of Responsible Individuals

By Robert S. Schriebman

Materials from Mr. Schriebman’s book entitled California Taxation Practice and Procedure published by Commerce Clearing House – CCH.

The IRS has the Trust Fund Recovery Penalty (formerly the 100-percent penalty). The EDD has CUIC 1735. Unlike the IRS version, the EDD asserts a full 100-percent exposure to targeted responsible individuals. In addition, a 10-percent nonabatable assessment penalty is also asserted, The IRS version is limited only to the employee’s share of FICA and withheld federal income taxes, roughly 60 percent of the corporate employer’s overall liability.

The two key elements of CUIC 1735 are responsibility and willfulness. The EDD must have both elements before they can make the 100-percent assessment stick.

CUIC 1735 states that any officer, major stockholder, or other person in charge of the affairs fo the corporation, or other business association, including a limited liability company, who willfully fails to pay contributions on the date on which they become delinquent, shall be personally liable for the entire amount of the contributions, withholdings, penalties, and any interest due and unpaid by the corporation or other employing unit.

Before the assessment can become final, the targeted responsible person must be given notice, an opportunity for an administrative hearing, and an appeal (CUIC 1221-1224). If the targeted individual loses his or her administrative heating and appeal, and does not pay within 10 days after assessment, he or she will be penalized a further 10 percent pursuant to CUIC 1135.

CUIC 1735 assessments must be done according to law. The EDD has a time limit on their ability to assess a targeted responsible individual. In the EDD code there is only one that governs time limits for all types of assessments. That section is CUIC 1132. The time limit for the EDD to issue an assessment usually depends upon whether the corporation or LLC filed quarterly employment tax returns. If returns were filed the EDD basically has three years from the filing date to issue an assessment against the responsible individual. If not returns were filed the time limit is eight years.


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.