This office does not handle:

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


Law Office of Robert S. Schriebman
734 Bart Earle Way, Suite 204
Rolling Hills Estates, CA 90274

Phone: 310-997-0342
Toll Free: 877-824-1563
Fax: 310-541-4946
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By Robert S. Schriebman



Tax audits are never welcomed. They are intrusive and demand transparency on your end from a governmental agency that is anything but transparent. They can also drag on indefinitely. Most taxpayers fail to realize that there is always the hidden specter of daily compounding interest accruing on whatever is eventually assessed. As the audit process drags on, it is common for auditors to request that you grant them an extension or waiver of the statute of limitations for examination. The EDD audits on a quarter-by-quarter basis. Unlike IRS audits that are year by year, EDD audits have statutes of limitations that apply to each quarter. The usual statute of limitations is three years per quarter.

The IRS statute extensions differ from the EDD version in a couple of respects. There are two types of extensions – the fixed and the unlimited – evidenced by Forms 872 for a fixed date, and Form 872A for an open-ended extension. The open-ended version can be terminated by giving the IRS 90-day written notice. The EDD only has a fixed date of termination on its waivers.

Great care must be taken when considering the granting of a statute extension. Any statute extension is a contract that states that if the taxpayer agrees to the extension, the EDD must make an assessment on or before that extended date. If the extension date passes without an assessment, the EDD cannot assess retroactively. Once the extension expires, it cannot be renewed by a further extension.

On March 17, 2020 the Office of Tax Appeals (OTA) issued its decision in Marco’s Trattoria Pizzeria, Inc. (2020-OTA-082). This matter involves a sales tax audit extension but the decision has universal messages that apply to an EDD statute extension. Let’s take a look at the case.

The Marco’s Trattoria Pizzeria, Inc.

Marco’s was audited by the CDTFA (formerly the SBE). The audit started in 2013 and only involved the year 2009. The audit dragged on to the point where the sales tax people requested and received five separate statute extensions. The audit was expanded to cover the years 2009 – 2013. Marco’s president signed the first four statute extensions. The company’s CPA, having a Power of Attorney, signed the fifth extension. The resulting assessment was larger than Marco’s anticipated. At the judge hearing Marco’s president made several arguments to no avail. The judge ruled that the assessment was timely made. Marco’s arguments are important for you to know and to realize that signing a statute extension may be a very dangerous thing.

Argument #1

Marco’s president, Mr. Capanni, argued that he did not recall signing the extension forms, and he denied ever signing them. A lapse of memory is not a valid legal argument for getting out any contract including a contract to extend the audit statute.

Argument #2

Mr. Capanni argued that the auditor or the auditor’s supervisor did not countersign any statute extension, or check the correct box on the form. This is where an IRS extension differs from its EDD counterpart. The IRS extension requires management to countersign the extension, as well as check a box on the extension form. Not so with the EDD or the sales tax folks. The judge ruled that failure to check a box is only a minor clerical error. The nature of the extension to the waiver is clearly defined by the remaining substantive information on the waiver form.

Argument #3

Mr. Capanni argued that the auditor did not comply with provisions of the sales tax audit manual. The EDD’s audit manual is outdated and provides only sparse information. It has no legal weight and no statutory or regulatory authority.

Argument #4

Mr. Capanni argued that the subsequent waiver forms signed after the first waiver form were for different “audit periods” and therefore did not represent extensions of the original waiver. Apparently, Mr. Capanni failed to read the forms. Every new waiver form included the earlier periods and added the current period extended. Each form encompassed all preceding audit periods.

Argument #5

Mr. Capanni argued that his CPA had no authority from him to sign the final statute extension that encompassed all previous open periods. He further argued that the CPA’s signature should have been notarized and it was not. The judge ruled that there was no requirement in the law that a POA has to be notarized or that the representative’s signature on the extension form must be notarized. The real lesson here is that once you give a professional a power of attorney to represent you in any tax controversy, once that representative acts on your behalf it cannot be retracted. That is why it is important to choose your tax representative wisely.

Argument #6

Mr. Capanni argued that the CDTFA did not prove that the Notice of Assessment was mailed on the date shown on the Notice. The government is required to furnish proof of mailing. The judge ruled that the CDTFA is only required to place the NA in a postage-paid envelope addressed to the taxpayer’s address as it appears in its internal records. The giving of the Notice is deemed complete at the time of the deposit in the post office. The EDD, on the other hand, now sends all assessment notices by certified mail. They are required to send it to the employer’s last known address.

All the arguments addressed by Mr. Capanni fell on deaf ears. This should tell you that once you sign a statute extension it is almost impossible to get out of it.

The Impact of Accruing Interest

When you give the EDD a statute extension, most people do not take into account the impact of accruing interest. Interest compounds daily while the extension is in effect. Interest does not stop accruing while the audit is placed on hold. Very rarely does anyone take this into account when granting the extension. One does not take into account human nature. Without fail, when you grant an extension your assigned auditor shelves your audit and goes on to more pressing matters. Your case gets put on the bottom of the pile; or on the back burner, so to speak.

In the Marco’s matter, the taxpayer asked the OTA to abate interest during the years the audit period was extended. He argued that the sales tax folks ignored his matter until it was time for them to get another extension, and another. He felt these were unreasonable delays caused by governmental inactivity. The judge rejected his argument and just concluded that the time the audit process took was reasonable.


Never sign a statute extension lightly or as a matter of routine. A statute extension is doing the government a favor. But, it’s all one-sided. There should be equal concessions by the EDD such as an agreement not to assess penalties. If the EDD wants to extend the audit by a fixed date in the future, you have a right to request a shorter extension. You do not have to sign what the EDD puts in front of you. As a contract, there are implied covenants of good faith and fair dealing. If the EDD drags its feet, and does not complete the audit promptly, you have the right to argue that the EDD did not contract in good faith.


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. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.

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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