You’ve gone through the process of an EDD audit and now you owe the state of California money. Like many business owners and taxpayers, you may be wondering how to pay those penalties. The EDD works through the Central Collections Division to notify you as to how much you owe and when it’s due.
Generally, the EDD has 20 years to collect money from a taxpayer. This is often surprising to California taxpayers and business owners because the Internal Revenue Service (IRS) generally has only ten years to collect a tax debt. Here are the four ways you can pay your EDD audit penalty:
- Paying your tax liabilities in full
- Paying your tax liabilities in installments
- Using an Offer of Compromise to pay the debts
- Asking for a hardship suspension option, which leads to the suspension of collection for a duration of time because you are unable to pay off the debt
Even if you do not have the funds to pay the entire tax liability in full, it is crucial that you seek at least one of these options for payment. If you do not at least attempt to pay the EDD what you owe, you may not be able to negotiate a favorable repayment plan. An experienced tax attorney can help you decide on your best option and obtain a payment plan with the EDD.
If you do not opt for one of the four repayment options, the EDD can garnish your wages in order to pay taxes owed. When this happens, the EDD will send a “wage garnishment order” to your company or employer. The company must deduct a certain percentage (typically 25% of net income) from your monthly income that will serve as payment for your debts.
In addition to wage garnishments, the EDD can also use the following means:
- Levy (or take) money from your bank account
- Stop payment of unemployment and disability wages
- Levy (or take) state and federal income tax refunds
- Limiting lottery winnings
- File a lien against you
The last thing you want to do is to be forced into one of these extreme options. Your best path is to hire a professional tax attorney with experience in dealing with EDD collections and EDD audits. This lawyer can make sure you have the best tax repayment plan established.
Allison Soares is a partner and tax attorney at Vanst Law. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits.