THE EDD TOOK MY TAX REFUND

What Can I Do About it!?

By Brian E. Hawes, Esq.

The following is for general purposes only. It is not, nor is it intended to be, legal advice. You should contact an attorney for formal legal advice for your individual situation.

The EDD can take your tax refund if you were overpaid benefits and fail to repay them.

There are two ways you can be overpaid benefits:

  • Fraud. This is when you make a wilfull false statement or withhold information from the EDD in order to obtain benefits.
  • Non-Fraud. When you receive benefits but were weren’t at fault for receiving them.

It doesn’t matter how you received your overpayment — by fraud or by non-fraud. The EDD can take your tax refund in either case. The EDD can take your tax refund to pay (“offset”) any amount you owe them because of an overpayment.

The EDD can take your California State Income Tax Refund.

The EDD can also take your Federal Income Tax Refund.

The EDD can take your tax refunds until your debt is paid off.

Interest continues to accrue on amounts you owe the EDD. You may have your tax refund taken to offset the debt this year, but because of the interest on the debt, you may owe even more the next year.

How did this happen to me?

Let’s start with what probably happened several years ago.

When the EDD became aware that you might have been overpaid benefits, they would have sent you a letter entitled “Notice of Overpayment” or “Notice of Potential Overpayment”. In the letter the EDD explained that they believed you received benefits you should not have received, and demanded that you pay them back. You could have appealed the EDD’s determination. You had either 20 or 30 days to file your appeal. Chances are you never filed an appeal from the Notice of Overpayment, so the determination of the EDD became final.

If you never received the Notice of Overpayment, or received it late, you should talk to an attorney right away.

Perhaps you did file an appeal and you did have a hearing before an administrative law judge, but the judge agreed with the EDD that you were overpaid benefits and the judge ordered you to pay them back. Again, you had either 20 or 30 days to appeal the administrative law judge’s decision requiring you to pay back the benefits. You could have appealed the administrative law judge’s decision to the entire California Unemployment Insurance Appeals Board. However, you never filed an appeal of the judge’s decision, and the judge’s decision became final.

If you appealed your case to an administrative law judge, but never received the administrative law judge’s decision, you should talk to an attorney.

If you appealed your case to the entire California Unemployment Insurance Appeals Board, but the Board ruled against you, you could appeal their ruling to the Superior Court. You have six months to file that appeal. If you did not file an appeal within six months, the decision of the Board became final.

By failing to appeal the Notice of Overpayment, or by losing at every appeal you took, the EDD’s determination that you were overpaid benefits and had to pay them back became a final decision that could not be changed by a judge. That is most likely why your tax refund has been intercepted.

What can I do about this now?

You have a some options.

You can pay off the debt. You can send payment to the EDD for the full amount of the outstanding balance, or you can try to work out an installment payment plan to pay off the debt over time. The EDD will have to agree to the payment plan. Here is the EDD webpage. However, even though you are placed on an approved installment payment plan, the EDD is still entitled to take your income tax refund. See the EDD Installment Agreement Information Sheet (p.2).

You can file an appeal. You should have done this a long time ago, but you can still try to appeal the EDD’s Notice of Overpayment. Judges are not required to hear appeals that are filed late, so you should have a very good reason why you are just now filing your appeal.

You can talk to a bankruptcy lawyer. It is beyond the scope of this article to advise whether you can have your EDD debt discharged in bankruptcy. If you are considering bankruptcy, you should talk to a bankruptcy lawyer first.

END OF ARTICLE

Copyright © 2016 Brian E. Hawes, Esq. All Rights Reserved

rev. 4/1/2016