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Fillable Printable Information Sheet: Personal Income Tax Adjustment Process (De 231W)

Fillable Printable Information Sheet: Personal Income Tax Adjustment Process (De 231W)

Information Sheet: Personal Income Tax Adjustment Process (De 231W)

Information Sheet: Personal Income Tax Adjustment Process (De 231W)

PERSONAL INCOME TAX ADJUSTMENT PROCESS
If the Employment Development Department (EDD) audits the
employer’s business records and determines that the employer
failed to properly withhold California Personal Income Tax
(PIT) from the wages paid to the workers, the EDD will issue
an assessment for the PIT that should have been withheld.
However, the employer has the opportunity to gain relief
from some or all of the PIT liability, and related penalties and/
or interest, through the use of the Claim for Adjustment or
Refund of Personal Income Tax, DE 938P. The Declaration,
DE 6028P, may be used to gain relief from some or all of the
PIT assessed and some of the interest, however, the penalties
will not be reduced. Please read the following information
carefully before completing these forms.
NOTE: The relief granted for PIT through the use of the
following methods does not adjust the assessed liability for
Unemployment Insurance, Employment Training Tax, or
State Disability Insurance.*
FIVE METHODS FOR ADJUSTING A PIT ASSESSMENT
PIT may be adjusted using one or more of the following
methods:
1. Recalculation of PIT Based on the Worker’s Federal
or California’s Employee Withholding Allowance
Certificate, Form W-4/DE 4
The employer may reduce the PIT assessment, and
related penalties and interest, by recalculating the
amount of PIT that should have been withheld.
If the auditor assessed PIT at a flat rate or estimated
at six percent (6%) due to the unreported wages
being unallocated and/or the payroll periods not
clearly identified, and the employer has a signed
Form W-4 or DE 4 from the worker during the time
that he or she worked for the employer, the employer
may recalculate their PIT withholding. Use the filing
status and number of allowances on the Form W-4
or DE 4 and the appropriate tax withholding table
in the California Employers Guide, DE 44, for the
year(s) of the assessment. The employer must submit a
completed worksheet for each worker assessed when
the employer recalculates PIT using this method.
Prior year PIT withholding schedules are available
on the EDD website at www.edd.ca.gov/
Payroll_Taxes/Rates_and_Withholding.htm.
*Includes Paid Family Leave (PFL)
2. Recalculation of PIT Based on Single With Zero
Allowances (S-0)
If the employer does not have a signed Form W-4 or
DE 4 from the worker, the employer may use
a filing status of Single with zero allowances
(S-0) to recalculate the PIT. This may reduce
the amount assessed below the estimated
level. The employer must submit a completed
worksheet for each worker assessed when the
employer recalculates PIT using this method.
3. Recalculation of PIT Using a Reasonable Sample
If the auditor included a large number of workers in
the PIT assessment, the employer may use a reasonable
sample to recalculate the PIT that should have been
withheld.
The sample must include at least four representative
pay periods during the most recent calendar year for
which the unreported wages are equal to or greater
than the average unreported wages per pay period.
The employer must schedule the individual wage
payments for the four pay periods, calculate the
percentage of PIT that should have been withheld
from each wage payment based on the Form W-4/
DE 4 or S-0 filing status, and apply that percentage to
the total unreported wages for the four pay periods to
recalculate the total PIT.
The EDD will adjust the assessment if the PIT
percentage from the sample is less than the flat rate
percentage used in the audit assessment.
4. Certification by the Worker That the Wages Were
Reported to the Franchise Tax Board (FTB) on a
DE 938P
The employer may be relieved of PIT assessed for any
worker who certifies that he or she reported the wages
on his or her California state income tax return. The
worker must complete the DE 938P, items (5)
through (7).
This certification does not relieve the employer from
penalties for failure to withhold PIT, or from certain
portions of the interest on the PIT assessment. For
this reason, it may be to the employer’s advantage to
also recalculate PIT using one of the other methods
described above.
DE 231W Rev. 11 (9-17) (INTERNET) Page 1 of 2 CU
5. Declaration That the Workers Were Issued a Federal Form
1099, Form W-2, or Schedule K-1 on the DE 6028P**
The employer may be relieved of the PIT assessed if
the employer can declare under penalty of perjury that
the workers were issued a Form 1099-MISC, Form W-2
(which includes state and local income tax information
for the State of California), or Schedule K-1, and that
the forms were filed timely with the Internal Revenue
Service (IRS) and/or the FTB. Be advised that the
DE 6028P is signed under penalty of perjury.
If the employer can make this declaration under
penalty of perjury, the DE 6028P should be completed
and submitted to the auditor. The EDD may verify with
the workers, the IRS, or the FTB that the forms were
furnished and filed.
If your Form(s) W-2 are filed by your agent, it is your
responsibility to verify that the electronic Form(s) W-2
file contains information about state and local income
taxes for the State of California. If the Form(s) W-2 files
contain another state’s income tax information or did
not contain any state income tax data, the DE 6028P
process should not be used. You may request to be
relieved of the PIT assessed through any of the other
four available methods.
This declaration does not relieve the employer from
penalties for failure to withhold PIT, or from certain
portions of the interest on the PIT assessment. For
this reason, it may be to the employer’s advantage to
also recalculate PIT using one of the other methods
described above.
Note: Even if the employer uses the worker certification
adjustment (Method 4), or declaration (Method 5), it may
be to the employer’s advantage to recalculate the PIT using
Method 1, 2, or 3 in order to receive the greatest possible
adjustment to the PIT assessment.
RECALCULATION OF INTEREST
Interest will be recalculated when the worker certifies on
the DE 938P that he or she paid quarterly estimated taxes
to the FTB. Interest will also be recalculated when the
worker certifies that the wages were reported on his or her
California state income tax return. Generally, the employer
is relieved of any interest charged for periods after the
worker paid the taxes or filed the return.
SPECIAL INSTRUCTIONS FOR CURRENT YEAR AND
LAST COMPLETED CALENDAR YEAR PIT ASSESSMENT
DE 938P
If the EDD assessed PIT on wages for the current year and/
or prior completed calendar year(s), the employer must
prepare separate DE 938P(s). The employer may obtain
the worker’s certification and signature after the worker
has filed his or her California state income tax return with
FTB for the current and/or last completed calendar year.
However, the employer may submit DE 938P(s) at any time
for those workers who have filed quarterly estimates with
FTB and have signed a DE 938P.
TIME LIMITS TO FILE CLAIMS FOR REFUND
Filing forms DE 938P and DE 6028P with the EDD
constitutes a claim for refund under Section 1178 of the
California Unemployment Insurance Code (CUIC). There is
no time limit for submitting these forms when the assessed
PIT has not been paid. However, if the assessed PIT has
been paid, Section 1178 of the CUIC provides strict time
limits for filing a claim for refund with EDD. Claims for
refund must be filed either:
Within three years from the last day of the calendar
month following the close of the calendar quarter for
which the overpayment was made.
Within six months after the assessment becomes final.
Within 60 days from the date of overpayment,
whichever period expires later.
NO EXTENSION OF TIME TO FILE PETITION FOR
REASSESSMENT
A complete explanation of the employer’s appeal rights is
included with the official Notice of Assessment, DE 6517.
If the employer chooses to file a petition for reassessment,
the employer must file it within 30 days from the date of
the assessment.
The PIT adjustment process DOES NOT extend the time
limit for the employer to file a petition for reassessment. If
the employer wishes to file a petition for reassessment, the
employer must file it within 30 days from the date of the
assessment. Refer to Section 1222 of the CUIC.
Note: If the employer failed to pay the assessment amount
on or before the assessment becomes final, a fifteen percent
(15%) penalty of the delinquent contributions will be
added pursuant to Section 1135 of the CUIC. Additionally,
failure to file a petition and untimely payment of the
assessment amount will result in state tax liens being filed.
ADDITIONAL INFORMATION
When the employer has completed the DE 938P(s) and/or
DE 6028P(s), the forms should be sent to the office shown
on the front. If you need assistance in completing any part
of the PIT adjustment process, please contact the auditor.
The EDD is an equal opportunity employer/program.
Auxiliary aids and services are available upon request to
individuals with disabilities. Requests for services, aids,
and/or alternate formats need to be made by calling
888-745-3886 (voice) or TTY 800-547-9565.
**The DE 6028P only applies to audits completed after July 1, 2008.
This information sheet is provided as a public service and is intended to provide nontechnical assistance. Every attempt has been made
to provide information that is consistent with the appropriate statutes, rules, and administrative and court decisions. Any information that
is inconsistent with the law, regulations, and administrative and court decisions is not binding on either the Employment Development
Department or the taxpayer. Any information provided is not intended to be legal, accounting, tax, investment, or other professional advice.
DE 231W Rev. 11 (9-17) (INTERNET) Page 2 of 2 CU
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