How to respond to an EDD Levy if you can’t pay the taxes owed

How to respond to an EDD Levy if you can’t pay the taxes owed

Contact the EDD office. Try to contact the Agent who levied your account. You can usually locate the office and the Agent by their signature information on the Levy. If not, contact the local office and provide your EDD account number. Anybody who answers the telephone should be able to tell you who has been assigned to the matter.

Advise the Agent that full payment can not be made and you want to enter into a Installment Agreement (“IA”). Before doing this you must know there are 3 types of IAs:

  • The Short Term: This is where a full payoff can be made within 6 months or less.
  • The 12 Month Term: Just what is says a full payoff in 12 months or less.
  • The Long Term: More than 12 months.

The Short Term: Requires little or no financial information. You just tell the Agent the amount of the monthly payment you would like and the Agent will send out the paperwork.

The 12 Month Term: To qualify you will need to provide the Agent with the businesses last 6 months bank statements, proof of major business expenses showing that full payment can not be made in less than 12 months.

The Long Term: To qualify be prepared to provide the Agent with all bits and pieces of your financial situation, including but not limited to: the last 6-12 month’s bank statements; A/Rs; all APs and proof of payments of the APs- i.e. payroll, rent, supplies, materials, insurance, vehicle cost, court orders, taxes, other IAs, Profit and Loss for the most current quarter and for the last year, etc. Remember it isn’t good enough to have a bill you must show a history of paying it. Unless the bill is recent and payment is to begin quickly. To qualify for this IA you must show that you can not pay the debt off any sooner than your proposal.

Once your IA is approved the EDD will send out the paperwork and authorization to auto debit. The EDD loves the auto debit so be prepared for this.

The EDD will place a hold on all future levies once you begin to work with them. The EDD will not Levy in the future unless you default. A default includes missing any current taxes or returns due. You are allowed one missed payment. But if you miss a payment don’t hide this fact. Let the Agent know and try to make it right asap or be prepared for a bigger fight.

I also suggest that after an IA is set up you start operating out of another bank account with a different bank. Keep the old account open just for tax and IA payments.

By the way if any of the levied funds were for payroll, for employees other than the owners, the EDD will release the Levy as to the amounts due employees if you can show proof of the required payroll needs.

 



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