What are my options if I have an EDD tax liability?
It is not uncommon for a business to experience payroll tax difficulties that result in a tax liability at some point. If you have an EDD tax liability, you may need to request an affordable payment plan. Payroll taxes are collected and remitted tot the taxing authorities by business. Therefore, sometimes the business does not have enough cash flow to pay the tax liabilities associated with payroll tax returns. The EDD is very aggressive in attempting to collect outstanding tax liabilities. Knowing your rights as a business owner is crucial so that the EDD does not overstep its boundaries in the process of attempting to collect past due taxes.
Do I have to pay the EDD in one lump sum?
If you have a tax liability with the EDD, you are not required to pay the liability in full. If you are requesting a payment plan that is paid off in full in 12 months you generally will not need to provide financials to the EDD to establish the ability to pay. If you are requesting an installment agreement that will take longer than 12 months to full pay, you will need to submit financial statements to the EDD to establish your ability to pay on a monthly basis. The EDD has their own financial statement form that can be found at http://www.edd.ca.gov/pdf_pub_ctr/de926c.pdf. The financial statement will disclose to the EDD assets and net monthly income. The net income will be determined by disclosing the monthly gross receipts of the business and the monthly operating expenses. The EDD may require substantiation for some of the claimed expenses. The EDD will require that the business remit to the EDD an amount equal to the net monthly income. This amount will constitute the monthly installment agreement to the EDD. Carefully analyze your financial statements and ensure that all of your expenses are included. Also, make sure to properly account for expenses on a monthly basis.
The EDD could file a lien to secure their liability. Interest will accrue during the installment agreement. You must provide the information necessary to substantiate your inability to pay the full amount due. You will need to provide sufficient documentation such as the past three months’ bank statements, profit and loss statements, etc. In addition, the EDD may attempt to assess the business owners personally for business tax liability.
Can my EDD installment agreement be revoked?
The EDD payment plan will remain in effect unless you:
- Fail to make payments as agreed, including nonpayment, late payment, paying less than agreed, or checks returned by your bank unpaid.
- Incur additional liability after the agreement is negotiated. Usually additional liabilities arises because you do not pay current taxes.
- Fail to file all required reports and/or DE 88’s on a timely basis without good cause.
It is imperative that you do not default on your installment agreement once it is established. If you default you might have to go through the entire process to establish an installment agreement again.
If you have an EDD tax liability and have questions about your rights, please contact an EDD tax attorney at Disparte Tax Law today for a free consultation. We can explain your options, and we have the experience to know how to protect the rights of taxpayers when dealing with the EDD.