California EDD offers taxpayers tax settlement program, where EDD and taxpayer can settle a claim for less than the amount owed. EDD can settle if it evaluates costs and risks associated with the litigation of the case and determines that it is better and less expensive for EDD to settle for lower amount than to litigate in court. The Settlements Program allows an employer the opportunity to enter into a settlement agreement to also avoid the cost of prolonged litigation associated with resolving a disputed employment tax matter.
California EDD will consider settlement offer only when when the assessment or denial of claim for refund is already under petition with the California Unemployment Insurance Appeals Board (CUIAB), meaning when taxpayer appeals assessment or denial of claim for refund. If the case is still in progress or involves fraud, intent to evade, and/or a criminal violation(s), the case is generally not eligible for settlement.
When reviewing an offer, the EDD will consider the risk of loss for the State and the cost of litigation balanced against the benefits of reaching a settlement agreement. Issues of fairness, financial hardship and the survival of the business may be considered by the EDD to establish a settlement amount, but such issues can not be used by taxpayer as the sole reason for entering into a settlement agreement.
Upon approval of the settlement offer, the employer and the EDD will enter into a settlement agreement. All settlement agreements are subject to approval by an administrative law judge, and some require approval by the CUIAB and/or the Attorney General.
How to Apply.
To apply for settlement, a taxpayer must send a settlement offer in writing to the EDD. In the letter a taxpayer must include his or her EDD employer account number, the specific assessment against him or her or claim for refund for which taxpayer offers a settlement, date of assessment or denial of claim for refund, amount of liability involved, and the time period covered. A taxpayer must also describe the basis for offer, including the amount and terms of the offer. EDD also requires taxpayer to include an analysis of the risk of loss to the State or a reasonable estimate of the cost of litigation which appears excessive and the reason why taxpayer’s offer should be considered. If a taxpayer has anyone who will negotiate on taxpayer’s behalf, offer must include name, address, and telephone number of the individual authorized to negotiate settlement agreement.
If taxpayer’s offer meets the criteria for a settlement, EDD will contact him or her for final negotiation and execution. If offer does not meet the criteria for a settlement agreement, taxpayer will receive a denial letter from the Settlements Office. Once negotiation begins, all information during negotiation is considered confidential and cannot be used by EDD against employer. If worker’s status is at subject, then employer may be required to start reporting worker as employee.
If the disputed employment tax matter is final or the sole issue is the inability to pay, it will not meet the criteria for a settlement. However, there may be other options available to you. Section 1236 of the CUIC requires a public record for any settlement agreement that forgives more than $500 in taxes and penalties. The public records are on file with EDD’s Director in Sacramento, California.
If taxpayer believes he or she qualify for settlement, then the settlement offer can be mailed or faxed to:
Employment Development Department
Settlements Office, MIC 93
PO Box 826880
Sacramento, CA 94280-0001
Fax: (916) 653-7986