California Payroll Tax Payment Plan Options Checklist
Understanding Payment Plans for Employer Payroll Tax
Debt
California employers who owe payroll taxes can request an installment agreement from the
Employment Development Department (EDD). The EDD administers all employer payroll tax
obligations in California, including Unemployment Insurance, Employment Training Tax, State
Disability Insurance, and Personal Income Tax withholding.
An installment agreement allows you to pay your tax debt over time through scheduled monthly payments rather than in a single lump sum. Payment plans help you avoid additional collection actions such as liens, levies, and wage garnishment while you satisfy your debt.
What an EDD Payment Plan Means
An EDD installment agreement is a formal arrangement between your business and the
Employment Development Department. You agree to pay your outstanding payroll tax liability in regular installments over a defined period.
Your full responsibility includes the entire amount owed, plus interest and penalties that continue to accrue during the payment plan period. This agreement changes only your payment schedule and does not reduce, forgive, or eliminate your tax debt.
Why the EDD Offers Payment Plans
The EDD provides installment agreements as a collection tool that allows the state to recover tax revenue while giving employers temporary relief from immediate full payment. Payment plans are available to employers who demonstrate an inability to pay in full but show both intent and capacity to pay over time.
Consequences of Ignoring Payroll Tax Debt
The EDD initiates collection actions when employers owe payroll taxes and do not pay or request a payment plan. These actions include assessing additional penalties and interest
charges, placing a lien on business or personal property, issuing levy notices to banks or other financial institutions, and pursuing wage garnishment.
Withholdings for Personal Income Tax and State Disability Insurance are considered trust fund taxes because they represent amounts you collected from employee paychecks. Employer-paid taxes, such as Unemployment Insurance and Employment Training Tax, remain your direct business obligations.
What Payment Plans Do Not Provide
Requesting an EDD payment plan does not mean your tax obligation is forgiven, reduced, or eliminated. A payment plan differs from penalty abatement or an Offer in Compromise, which may reduce the amount owed under specific circumstances.
Approval for an installment agreement does not prevent interest and penalties from continuing to accrue on your unpaid balance. An approved payment plan does not automatically stop collection actions already in progress, although the EDD may pause certain enforcement activities while reviewing your request.
Steps to Request an EDD Installment Agreement
Follow these steps to understand and request a payment plan for California employer payroll tax
debt
1. Confirm the specific taxes you owe by reviewing any notices or billing statements from the EDD.
2. Gather recent business financial statements, bank account information, and documentation of current debts and monthly expenses.
3. Contact the EDD Taxpayer Assistance Center at 1-888-745-3886 to discuss payment plan options and requirements.
4. Request Form DE 927B, the Installment Agreement Request form, or access it through e-Services for Business on the EDD website.
5. Complete the DE 927B form fully and accurately, including all requested financial information and documentation.
6. Propose a payment amount and frequency that fits your financial capacity, choosing from monthly, semi-monthly, bi-weekly, or weekly payment schedules.
7. Include a good-faith payment with your installment agreement request, as this payment is required for EDD to review your application.
8. File all missing and delinquent employment tax returns before submitting your payment plan request, as the EDD will not approve agreements for accounts with unfiled reports.
9. Submit your completed DE 927B form and good-faith payment to the EDD at the address provided on the form instructions.
10. Keep copies of all documents submitted, note the submission date, and record any confirmation information provided by the EDD.
Continue making payments during the review period to avoid additional penalties and interest charges while the EDD evaluates your request. Processing times vary based on the complexity of your financial situation and the current workload at the agency.
After Your Payment Plan Request
The EDD issues a written installment agreement if your request is approved. This agreement specifies your payment amount, due dates, and total payment term, and you must make payments according to the agreement schedule.
If your application is denied, the EDD notifies you of the reason and may discuss alternative payment arrangements. Interest and applicable penalties continue to accrue on your unpaid balance during the payment plan period.
A Notice of State Tax Lien will be filed for outstanding liabilities even if you have an approved installment agreement. An approved plan may prevent additional involuntary collection actions as long as you remain current on your scheduled payments.
Critical Mistakes to Avoid
Missing a scheduled installment payment can result in your payment plan being cancelled and collection actions resuming. You must notify the EDD immediately if your financial situation changes significantly or if you cannot make a scheduled payment.
Send all payments to the correct address specified in your payment plan agreement, as payments sent to the wrong location may not be credited properly. Respond promptly to any follow-up notices or requests for updated financial information, as failure to respond can result in plan cancellation.
Submit complete and accurate information on your initial application to avoid delays or denial.
Keep copies of your installment agreement and proof of all payments to protect yourself if disputes about your account status arise.
Facing State Enforcement or Payroll Tax Issues?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
We help with
- State enforcement actions and notices
- Payroll tax debt review and resolution
- Penalty and interest reduction options
- Payment plans and compliance solutions
- Representation before state tax agencies
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