Advice on 13 year old Debt with CA EDD

BILL'S ANSWER

While regular commercial and consumer debts generally have a four year statute of limitations in the State of California, debts owed to government agencies, such as the IRS, the Franchise Tax Board, or, in your case, the Employment Development Department, can be collected for much longer periods of time. For example, federal taxes owed to the Internal Revenue Service generally have a statute of limitations of ten years. However, California law provides no statute of limitations for the collection of unpaid state tax obligations, meaning that the state can try to collect such debts indefinitely.

First, you may want to contact the EDD to determine why they claim that you owe them money. Once you have determined the source of the obligation, the best piece of advice I can offer you is to consult with a qualified commercial tax attorney to discuss your situation and what steps you can take to mitigate the potential costs associated with this debt. To read more about the California Employment Development Department’s policies relating to payroll taxes, I encourage you to visit the EDD’s website.

If you and your attorney determine that this debt is a valid and collectable obligation, you may need to work out a plan to pay the EDD to prevent further collection activity against you. If you contact the EDD, they may be willing to negotiate a repayment arrangement with you. You may even be able to settle the debt for significantly less than is actually owed, if you can prove to the EDD that you do not have sufficient income or assets to fully repay the obligation. You should consult with your attorney to discuss your financial circumstances and to determine the best option available to resolve this debt.

If your business was a corporation or a limited liability company (LLC), you may not be personally liable for the tax obligations of the business. Generally speaking, the officers of a corporation or LLC are not personally liable for the debts of the business, including many tax obligations. However, if you withheld payroll taxes from your employees’ paychecks and then failed to turn the money over to the government tax authorities, you may be held personally liable for the debt based on your failure to execute your duty as the party responsible for the payment of your employees’ payroll taxes. You may also be personally liable for sales tax that you collected, but did not remit as required.

Again, I strongly encourage you to consult with an attorney specializing in business tax law to discuss the details of your situation, to determine your liability, and if liable, to decide the best way to repay this obligation. Also, make sure to discuss the possibility of reducing what you owe through an Offer in Compromise. It may be possible to settle the debt, if you can demonstrate a serious financial hardship, based on your income, living expenses, and assets.

Regardless of the source of the debt, is important that you address this matter in a timely manner to prevent the EDD from taking further action against you.

I wish you the best of luck in resolving this situation.

I hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

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