California Employment Development Department
The California Employment Development Department (EDD) offers a wide variety of services to millions of Californians under the Job Service, Unemployment Insurance, Disability Insurance, Workforce Investment, and Labor Market Information programs. As California's largest tax collection agency, EDD also handles the audit and collection of payroll taxes and maintains employment records for more than 17 million California workers.
Priority One: Stopping Aggressive Enforced Collections Like Bank Levies and Tax Liens
Inability to Pay
If you have a tax liability it is always best to pay in full. If you are unable to pay in full, you have many rights and options available to avoid enforced collections.
If immediate payment is not possible and you have an established history of timely reporting and payments with the EDD, and are not insolvent or bankrupt, you may qualify for an installment agreement.
Short-Term Installment Agreement
If the liability due is less than $25,000 for an active business or $10,000 for an inactive business, a short-term installment agreement may be an option. The maximum term is one year. If you are unable to negotiate a short-term agreement or if the liability is over $25,000 for an active business or $10,000 for an inactive business, the EDD will consider a long-term installment agreement. The request must be written and include the following:
- How the delinquent liability was established
- What action has been taken to resolve the liability
- A good faith payment.
- All Annual Reconciliation Statement(s) (DE 7), Quarterly Wage and Withholding Report(s) (DE 6), and Payroll Tax Deposit(s) (DE 88) that have not been filed/paid through the current quarter.
- A financial statement for Individuals (DE 926B) and/or a financial statement for Businesses (DE 926C)
- Corporations, limited liability companies (LLC) and limited liability partnerships (LLP) will be required to complete a Corporate Information Questionnaire (DE 204).
Defaulting an Installment Agreement
Once an agreement 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.
- Fail to file all required reports and/or DE 88s on a timely basis without good cause.
- Fail to submit timely Interim Contribution Return(s) (DE 2858) with payment when specifically required as a condition of the agreement.
- Are found to have intentionally provided false, materially inaccurate or incomplete information.
Offer in Compromise
In some situations when there is a genuine inability to pay back the full amount, the EDD will accept an amount less than the full amount owed. The guidelines are as follows:
The applicant's business must be inactive and no longer operating. Under these circumstances, you may apply for an Offer in Compromise.
If the business is still operating and active, you may apply for an Offer in Compromise only if you no longer have a controlling interest or any association with the business that incurred the liability.
- Must not have prospects of increased income or assets which allow payment within a reasonable period.
- Must not have assets which, if sold, would satisfy the liability.
- The amount offered must be more than the Department could expect to collect through involuntary means within four years of the time the offer is made.
- Compromises are prohibited for liabilities assessed for fraud (Section 1128) or where the employer has been convicted of a violation of the CUIC.
- Only non-disputed, final tax liabilities will be considered.
- Must not have access to income sufficient to pay more than the accumulating interest and 6.7% of the outstanding liability annually.
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 tax, interest, and penalties and costs due.
Notice of a State Tax Lien
The recording of a Notice of State Tax Lien must take place within 10 years of the date the lien arose. The recorded lien is valid for 10 years and may be extended in 10 year increments. An EDD tax lien is enforceable for all obligations which exist against the owner of the property.
Interest on Tax
Interest is charged on all delinquent taxes, including Unemployment Insurance, Employment Training Tax, State Disability Insurance, and Personal Income Tax withholdings.
The interest rate is established pursuant to Section 19521 of the California Revenue and Taxation Code. The interest rate is adjusted semiannually based on the short-term federal rates in January and July of each year.
Interest is compounded daily on:
- All unpaid tax
- Certain penalties
Interest is required as there is no provision in the California Unemployment Insurance Code to waive or cancel interest.
Use the daily interest factors in the table below to calculate the interest due on delinquent amounts.
Power of Attorney with California
You may have a qualified professional represent you. This requires that you have a power of attorney form completed and signed before any tax matter can be discussed with your representative. The state of California accepts the BOE-392 Power of Attorney for this purpose.
Below are links to information on California's other two taxing authorities: