California Payroll Tax Appeals – Part One

It is important to note that according to Unemployment Insurance Code ("UIC") Section 1735, an officer, owner or any person in charge of affairs of any corporation, LLC or LLP, is personally liable for the amount of the contributions, withholdings, penalties, and interest unpaid by said business entity, if business entity willfully fails to pay the amount.

Assessments become delinquent if not paid before they become final, and subject to a penalty of 10%. UIC Section 1135, Sections 1222 and 1224 provide that assessments become final (and delinquent) after 30 days from an assessment date, or the taxpayer petitions or appeals assessment, within 30 days of an administrative law judge or appeals board decision date.

Therefore, filing an appeal generally extends the amount of time the taxpayer has to pay.

Employment tax assessments imposed by the EDD under UIC is appealed before an administrative law judge. The employer-taxpayer needs to file a petition for review or reassessment within 30 days of the service of a notice of assessment or denial of claim for refund.

This period can be extended for another 30 days by the administrative law judge if good cause is shown by the taxpayer-employer. UIC Section 1222 states that the assessment or denial of each claim for refund will be final if the taxpayer fails to file an appeal within the allowed period.

The appeal must be in writing and can be mailed, shipped, overnighted, electronically transmitted by email or brought in person to the applicable office of the appeals board or even to EDD branch office.

Notices are served by the EDD in person or by mail. The time for filing a petition (30 days) is extended five days if the petitioner is within the state (35 days), 10 days if outside the state but within the country (40 days), and 20 days if outside the country (60 days), per UIC Section 1206. The notice is effective at the time of mailing by EDD or at the time of delivery to employer-taxpayer.

In an appeal petition, the employer who appeals must provide the name of the petitioner (person or business entity), employer EDD account number and the mailing address of the employer. It is not required, but the petition also may include a telephone number, the email address of the employer, the EDD case number, statement of reasons for appeal, any request for language assistance (Spanish, for example), and the signature of the employer who appeals the assessment of the denial of a tax refund.

Prior to the hearing before an administrative law judge, the taxpayer can and probably should request a copy of all documents in the audit file. The EDD will charge a small amount for copying the file. However, it's a good idea to attain the copy as it will allow the taxpayer to review the EDD's answer to his or her petition.

The taxpayer may find it helpful to figure out under which category he or she falls (corporate officer, agent, salesman, homeworker, unlicensed worker, artist or author). In addition, he or she could find it helpful to review EDD publications pertaining to the taxpayer's particular industry, or talk to an attorney about it.

An attorney would review relevant precedential cases. It is important to determine the taxpayer's status in order to figure out what laws and regulations apply to the person or business entity, which in turn will help to figure out proper arguments to present on appeal. Afterward, any penalty issues will be addressed as well as the statute of limitations (the time period within which appeal is allowed).