California Payroll Tax Appeals – Part Two

During an appeal, the taxpayer should prepare and file a pre-trial brief or memorandum of points and authorities, in which he or she describes the relevant law and its application to his or her case in support of of it.

The taxpayer may want to locate and interview helpful witnesses, including workers previously interviewed by EDD, principals of the business and its management employees.

It is worthwhile noting that an Administrative Law Judge may order the taking of interrogatories (a set of written questions to opposing party, answers to which may later be used as evidence).

Depositions, which are formal, detailed, oral questions posed by an opposing party or his or her attorney, recorded and transcribed, can also be used as evidence.

Witnesses should be subpoenaed (called) by so called “subpoena duces tecum,” issued by administrative law upon request by either party to in the appeal. A subpoena comes with a mandatory declaration under penalty of perjury on a pre-printed form or your own.

A taxpayer can request one from Office of Appeals of the EDD. The subpoena must be delivered to witness in person with enough time before the hearing for a witness to attend.

Any adult individual can deliver the subpoena. Generally, a witness can not refuse a properly prepared and served subpoena, unless the witness legally objects to it. The law also requires a certain small amount to reimburse a witness for his or her expenses and time.

After this step, the parties to appeal (the taxpayer and the EDD), can stipulate as to facts – to agree on certain facts which will not be disputed by either party.

At this point, the  judge will conduct a hearing. At this hearing, either party can testify, review case file, introduce exhibits, question opposing witnesses or party on any relevant questions, to answer opposing evidence and to impeach any witness.

For those lacking English skills sufficient to understand or present their case, the EDD will provide interpreters free of charge. Evidence rules are more relaxed than in regular court proceeding.

Basically, any relevant evidence can be presented. The hearing can be attended by any member of the public. The judge can also allow to file a written argument after the trial per 22 CCR, Section 5064.

Once the administrative judge issues a decision and it is explained, the EDD must quickly serve it on the taxpayer. 

The California Unemployment Insurance Appeals Board 

The decision by the Administrative Law Judge can be appealed to the Board within 30 days. The appeal must be filed in a timely manner or the taxpayer will lose the option to appeal.

The Board will review matter, and can allow a hearing on request. In a few cases, they may also allow new evidence upon request, although this is unusual. Both parties may once again file legal briefs. If the Appeals Board fails to serve notice of decision on taxpayer within 90 days after taxpayer filed for an appeal, then the taxpayer can consider appeal petition as automatically denied.

The Superior Court

The Employer-taxpayer may choose to file a lawsuit in California Superior Court if certain pre-requisites are met.

First, the employer must have already paid tax, interest and penalties. Then employer must file with the EDD a claim for refund in writing.

The claim for refund must state the grounds on which the claim is founded, the period covered, amount claimed and the date of payment. The EDD must deny the claim, then the taxpayer must have a hearing by an Administrative Law Judge, after which the Unemployment Insurance Appeal Board must deny the claim for refund.

Only after this can the taxpayer go to Superior Court. The taxpayer must file a complaint within 90 days of the service of a notice of decision by the Appeals Board.

The EDD may, in writing, extend for a period of not exceeding two years, the time within which court action may be instituted if a written request for such extension is filed with the director within the 90-day period per UIC Section 1241(a).

There are many payroll tax resources for an employer to use including the EDD website. However if you find yourself in hot water and past the point self-representation, please give my office a call.

California's EDD payroll tax department may be big, but like so many branches of our state government, it operates in a specific way, following specific rules and regulations. When you know how it works, it's easier to fix things and get your business running smoothly again.