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Employer’s Bill of Rights in California

As a California employer, you have a right to:

[Skip to IRS Rights]

 

COURTEOUS AND TIMELY SERVICE

You are always entitled to courteous and timely service from the Employment Development Department (EDD) employees. If you believe you have been treated inappropriately, you should contact the employee’s supervisor.

 

CONFIDENTIALITY

Information maintained by the EDD is confidential and cannot be published or made available for public inspection. However, in certain instances, the law requires this information to be shared with other governmental agencies. When these instances occur, the EDD should closely follow the law to protect your rights.

 

ACCURATE ADVICE AND ASSISTANCE

You have the right to call upon the EDD for accurate information and assistance and to have all your questions answered. The EDD’s policy is not to penalize employers for failure to comply with the law if it can be substantiated that they acted on incorrect instructions from the EDD staff.

  • Employment Tax Offices (ETO) are available to serve you when you need information or assistance. Your local ETO is listed in the California Employer’s Guide (DE 44) and on the website at www.edd.ca.gov/Office_Locator/. You may also call the Taxpayer Assistance Center at 888-745-3886.
  • Answers to most questions relating to employer reporting requirements, Unemployment Insurance and State Disability Insurance benefits, California Personal Income Tax, and various programs and services administered by the EDD are located in the California Employer’s Guide (DE 44). This guide is updated annually and available to all employers. Copies may be ordered online at www.edd.ca.gov/Forms/default.asp or by calling 888-745-3886. You may also view it online at www.edd.ca.gov/pdf_pub_ctr/de44.pdf.
  • If you are not sure if your workers are employees or independent contractors under the law, you may request a copy of the EDD’s Employment Determination Guide (DE 38) to help you make this determination. The EDD may also provide you with verbal guidance on employee or independent contractor issues and with general information sheets on various classes of employment. You can also request a written determination by using the Determination of Employment Work Status for Purposes of State of California Employment Taxes and Personal Income Tax Withholding (DE 1870). Call the Taxpayer Assistance Center at 888-745-3886, visit your nearest ETO, or download the forms and information sheets from the website at www.edd.ca.gov/Payroll_Taxes/Forms_and_Publications.htm.
  • Information regarding seminar dates, times, locations, and subjects is available at www.edd.ca.gov/Payroll_Tax_Seminars/ or by calling 888-745-3886.

 

CLEAR AND ACCURATE ACCOUNT STATEMENTS

If you owe taxes, you have the right to receive a clear and accurate account statement. Any adjustments made to your account will also be reflected in the statement. If you have questions or believe the statement contains an error, you are encouraged to contact the EDD at the address or phone number provided on the statement. [See How to respond to an IRS Notice or Letter]

 

YOUR RIGHT TO REQUEST AN EXTENSION TO FILE RETURNS OR PAY TAXES

The California Unemployment Insurance Code provides that an extension may be granted for up to 60 days when GOOD CAUSE is shown for a delay. Under an extension of time to pay, interest must be charged at the current annual rate and will accrue each day from the original delinquent date to the date of payment.

WHAT CONSTITUTES GOOD CAUSE?

Good Cause exists where the circumstances causing the delay are clearly beyond the control of the employer or where the delay is due to a mistake or inadvertence under circumstances not reasonably foreseeable by the employer. Employers must establish that (1) they acted in good faith (demonstrated history of timely payment and reporting). (2) they acted in a diligent, timely, and prudent manner, and (3) the circumstances could not have been reasonably foreseen. This is similar to what the IRS calls reasonable cause for penalty abatements.

 

YOUR RIGHT TO REQUEST A WAIVER OF PENALTY

If you are charged penalties for a late payroll tax return or payment, you may request that the penalties be waived. A waiver of penalty request will not be considered until the employer submits a request on e-Services for Business or in writing that explains why good cause exists and the reason(s) for the untimeliness. Billing will continue while the request is being reviewed. To avoid accrual of interest and to stop the collection process, the amount due must be paid. If it is determined that the penalty should be waived and the penalty has already been paid, a refund will be issued or applied to any outstanding liability.

The request must include a detailed explanation showing GOOD CAUSE for the delay. Penalties may be waived when good cause is shown for a delay in:

  • Filing and paying your Payroll Tax Deposit (DE 88) or filing your Electronic Funds Transfer.
  • Filing and paying your Quarterly Contribution Return and Report of Wages (DE 9).
  • Filing your Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C).
  • Filing and paying an adjustment on your Quarterly Contribution and Wage Adjustment Form (DE 9ADJ).
  • Filing and paying your Employer of Household Worker(s) Annual Payroll Tax Return (DE 3HW).
  • Filing your Employer of Household Worker(s) Quarterly Report of Wages and Withholdings (DE 3BHW).

 

AN IMPARTIAL AUDIT

If your business is selected for an audit, the EDD will attempt to schedule the audit at your convenience. You have the right to an impartial audit and a full explanation of the audit findings.

You have the right to have someone, such as an attorney, enrolled agent, or accountant, present during the audit or to represent you in your absence. [See 6 Ways to Reduce Your Chance of an IRS Audit]

 

YOUR RIGHT TO AN APPEAL

When you disagree with an action taken by the EDD, you are encouraged to discuss the issues with an EDD representative, supervisor, and office manager. You may also appeal certain actions to the California Unemployment Insurance Appeals Board (CUIAB). The CUIAB is a review board independent of the EDD. Actions that may be appealed to the CUIAB are:

  • An assessment for payroll taxes including California Personal Income Tax and State Disability Insurance withholdings.
  • A denial of a request to transfer an employer’s Unemployment Insurance (UI) reserve account.
  • A denial of a protest to an unfavorable adjustment to an employer’s UI tax rate or the factors used to compute it.
  • A denial of a protest to the amount of UI benefits charged to an employer’s reserve account.
  • A denial of a claim for a credit or refund.
  • A denial of a request to make a voluntary UI contribution to reduce an employer’s UI tax rate.

When the EDD takes an action that may be appealed, you will be notified by mail. To begin the appeal process, you must file a petition. The notice the EDD mails to you will explain your petition rights and responsibilities. Please read all the EDD notices carefully because strict time limits apply for filing appeals. [See What to Know About IRS Appeals]

 

TAX PAYMENT OPTIONS

Employers have a legal obligation to voluntarily report and pay payroll taxes and withholdings when due. California Personal Income Tax and State Disability Insurance are “trust fund taxes” that are withheld from employees’ wages. You hold these funds “in trust” for the EDD. [See How the IRS can collect Trust Fund taxes from you personally]

 

INSTALLMENT AGREEMENT

Although the California Unemployment Insurance Code does not provide for installment agreements, if immediate and full payment of payroll taxes creates a financial hardship, an installment agreement may be requested.

Installment agreements will not be granted in cases where a commercial loan or other means are available to pay the liability. Contact your local ETO for
information on installment plans or to request Information Sheet: Installment Agreement (DE 631P).

When an installment agreement is approved, it is important to adhere to the terms of the agreement and to submit all future returns and payments timely. Failure to do so will initiate immediate collection action without further notice. If, during the course of an approved installment agreement, it is discovered that you are able to pay the tax in full, the agreement may be canceled. The agreement may also be canceled if it is discovered that pertinent financial information was withheld. In all instances of an approved installment agreement, the EDD will file a state tax lien. In addition, any refunds due to you by any other state agency will automatically be applied to the unpaid tax. [See What you should know about IRS Installment Agreements]

 

OFFERS IN COMPROMISE

In addition to payment plans, an Offers In Compromise (OIC) program has been established for accounts that are both inactive and out of business. Qualified applicants who do not have sufficient funds and/or assets to pay the liability within the foreseeable future may be able to eliminate their payroll tax liability at less than the full value. Contact the Taxpayer Assistance Center at 888-745-3886 for eligibility requirements. [See What you should know about an IRS Offer-in-Compromise]

 

SETTLEMENTS PROGRAM

The EDD’s Settlements Program allows an employer and the EDD to settle a disputed liability, thereby avoiding the risks and costs associated with litigating the disputed employment tax matter.

Call the Settlements Office at 916-653-9130 for more information.

COLLECTION ACTIVITIES

If you do not pay your payroll taxes, interest, and penalties, the EDD may begin to collect the money you owe using the following collection activities:

  • Filing a Notice of State Tax Lien (DE 2181) against your real or personal property. Recorded liens will be released when the tax has been paid in full or if the lien was filed in error. [See IRS Liens]
  • Issuing a Notice of Levy (DE 8005) to financial institutions or other parties. [See IRS Levies]
  • Issuing a warrant to seize and sell business and/or personal assets. As a matter of policy, the EDD will not seize or sell the primary residence of a tax debtor. [See IRS Asset Seizures]
  • Issuing an Earnings Withholding Order for Taxes (DE 9400). No more than 25 percent of your gross wages may be withheld. You have the right to protest this action if it causes a financial hardship. A hearing officer will determine if the withholding order should be upheld, modified, or released. Information concerning your right to a hearing is included in your copy of the withholding order. [See IRS Wage Garnishments]
  • Filing of criminal charges for certain violations of the California Unemployment Insurance Code.[See IRS Criminal Investigations]

 

See: What to Know About the State of California Franchise Tax Board Collection Process

See: IRS Adopts a New Taxpayer Bill of Rights 

Learn how we can help you by viewing the Services page, or contact us now at 1-949-260-4770 for a FREE consultation with our CPAs and former IRS Agents.  

We look forward to serving you.

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