It might be said if any of the California taxing authorities have threatened you with a lien or a levy, they’ve decided to take the boxing gloves off. You’re now in the ring due to long-delinquent taxes and it’s the bare knuckles version of boxing that they will try to hit you with.
When I say try, I mean that you still have a fighting chance, especially if you have the assistance of a seasoned tax attorney.
The delinquent tax round you are in – the balance you owe, whether you’ve made any attempts to pay, or have already received a Notice of State Tax Lien or Levy – can strengthen or weaken your case.
To begin with, let’s have a clear understanding of what EDD Liens and Levies are and if you receive a notice of one, what that can mean to you.
To begin, a tax liability owed to the EDD differs from your liability to the IRS. It may accrue if you have not paid payroll taxes or if you have failed to submit a quarterly or annual report on time.
If you are deemed to be an employer but did not pay wages in a particular quarter, you must still submit a quarterly report.
If you are paying workers under the table in order to avoid paying payroll taxes, you may be investigated for fraud. The EDD is empowered to audit companies suspected of, or reported for, payroll tax fraud.
Penalties include the amount of unpaid payroll tax as well as fines and interest charges and that money can be recovered in the same way as a normal tax liability.
How EDD Liens Work
If there is an unpaid liability, the EDD will first send you an Employer Account Statement listing the past due amount and requesting payment in full.
If you believe that the amount is wrong, or if you are unable to pay in full, it is important that you contact the EDD as soon as possible to request a revision or a payment plan. If the EDD does not hear from you and the amount isn’t satisfied, their next step is to record a Notice of State Tax Lien.
A copy of the Notice of State Tax Lien is mailed to your registered address and states that the amount of the unpaid tax is a lien on both real and personal property, including subsequently-acquired property, belonging to the taxpayer.
A tax lien will remain on your credit record indefinitely until the liability is paid in full and formally removed.
Once removed, the record of the paid lien will remain for an additional seven years. As the lien is detrimental to your credit rating, it is in your best interests to pay the amount and obtain the release even if you are not seeking to sell the property over which the lien is held.
Payment and Release of the Lien
When the EDD receives confirmation that liability has been paid in full, they will mail a Release of Lien to the County Recorder office within 40 days.
No record is sent directly to the taxpayer unless one is requested. You may request that a Status of Lien Release notice be sent to you; this will be at your own cost and the money collected in the same manner as the tax.
If you are selling or refinancing real estate, your escrow company will need to pay the lien with certified funds (cash, cashier’s check or money order) and the EDD must be notified in writing or via fax with a demand for a release of the lien. The release must be obtained before the property can change hands.