When You Owe The EDD – The EDD Tax Lien

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 can expect the filing of a Notice of State Tax Lien. The filing of a tax lien will occur regardless of whether or not you are making installment payments pursuant to any type of installment payment arrangement. The EDD is authorized to file with the office of the Secretary of State and record with any county recorder a Notice of State Tax Lien specifying the amount of taxes, interest, penalties and cost due the EDD.

CUIC § 1703 is the primary statute dealing with EDD liens. The statute states the following:

(a) If any employer or other person fails to pay any amount due this Department at the time that it becomes due and payable, that amount (including penalty, interest and costs) shall be a perfected and enforceable tax lien.

(b) For the purposes of this section, amounts are “due and payable” on the following dates:

1. (1) For amounts disclosed on a return received by the Department or for penalties, the date of the notice to the taxpayer of the amount due.
3. (2) For any amount reestablished under the provisions of Section 1875, the date of a written notice rescission.
5. (3) For all other amounts, the date the assessment is final.

What is the effect of an EDD lien? Once recorded an EDD lien gives notice to the world that the EDD has certain rights to all property whether real or personal, tangible or intangible, including all subsequent acquired property and property rights. Basically, a lien is a notice that says, “Hey, we come before you if you filed a lien after we did.” A lien is not a seizure; a lien is not a bank levy or wage garnishment. An EDD lien has the same effect as a recorded mortgage.

An EDD lien is good for 10 years from the date of its initial filing. If the EDD renews the lien before the first 10 years expire, the renewal is good for an additional ten years.

If you are selling or refinancing real estate, and there is a recorded EDD lien, your escrow company will have to contact the EDD for payment or for other legal procedures. To obtain a release of the EDD lien the full payment must be made in “good money.” Good money usually means a cashier’s check, certified check or money order. The escrow company should contact the EDD at the following address and fax number:

Employment Development Department
PO Box 826203, MIC 92G
Sacramento CA 94230-6203
FAX Number (916) 464-2711

If you are not selling or refinancing real estate and you wish to full pay the EDD and obtain a Release of Lien, you should make arrangements with your assigned collector or the EDD Taxpayer Assistance Center at (888) 745-3886 to make certain that a lien release is properly recorded with a county recorder and the Secretary of State. The lien release will not be mailed directly to you. It usually comes from The County Recorder’s Office

Improper EDD Lien Filing

Up until this point in our discussion we have assumed that the EDD tax lien has been legally filed and recorded. We have assumed that you owe the EDD a proper and legal amount. However, what happens when the EDD improperly hits you with a lien? While this is rare, it does happen. Sometimes an overzealous EDD auditor will arrange to have a lien filed against you upon completion of the audit. You have every intention of fighting the audit, and you have even filed a Petition with the California Unemployment Insurance Appeals Board (CUIAB). It is improper for the EDD to file a lien during the pendency of a timely filed Petition. This has happened to me on several occasions. I immediately contact the auditor, in writing, and demand that the lien be released immediately. If I get no response from the auditor, or I conclude that the auditor is not interested in addressing the situation, I contact the EDD Taxpayer Advocate. I have found the Advocate to be very responsive and cooperative. Soon I will have my lien release in hand.

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©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.