WARNING ABOUT NEW LOAN OFFICERS HIRES IN CALIFORNIA
FACTS
So you as a California Department of Corporations licensee sponsor desire to hire a mortgage loan originator. Be aware that it can take up to two weeks before the new hire can originate mortgage loans. And that presumes the MU-4 was updated before the request went into the DOC!
DOC takes up to 10 business days to make the MLO active with the sponsor company if nothing is wrong. First the sponsorship is submitted through Nationwide Mortgage Licensing System. If the MLO MU-4 is up to date when NMLS uploads to DOC, DOC does its checks and balances and takes up to 10 business days to complete. However, the business day before, the MLO generally receives an email that the MLO is approved to conduct business. The sponsor should keep a copy of the email if lets the MLO do loans before it appears on the NMLS website. The approval can take longer if the MLO has not updated the MU-4 immediately on taking employment.
MORAL
Remember, you are not authorized to conduct origination activity in a state until the regulator has approved your submission through NMLS. DRE takes about one or two business days and DOC can take up to 10 business days. So pick your license with care.
CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT AND THE AUDIT OF EMPLOYERS AS TO WHETHER THEIR MORTGAGE LOAN ORIGINATORS ARE INDEPENDENT CONTRACTORS OR EMPLOYEES
FACTS
First and foremost comply with Unemployment Insurance Code Section 650. Failure to do so will allow the EDD to take your independent contractor real estate salesperson and association brokers working as MLOs and make then W-2 employees and then assess you taxes, interest and penalties for at least a three-year period presuming you do not give EDD an extension to assess earlier periods. Do not do it unless the EDD gives you something in return. Like no penalty assessments and then only if the risk is not too great in terms of the potential assessment if you did not comply with UIC Section 650.
The EDD as a taxing agency has a statute of limitations for assessment. This limitation is three years under UIC Section 1132. For the EDD, the rules for the time limit for making assessments are set forth in Unemployment Insurance Code Section 1132. The Notice of Assessment must be issued within three years after the day of the month following the close of the calendar quarter during which the contribution liability included in the assessment accrued or within three years after a late return is filed, whichever period is later. An employer may waive this limitation period or may consent to an extension.
Assessments are made on a quarterly basis. It is not uncommon for an EDD auditor to make an appointment to conduct and examination, spend a few hours reviewing various books and records only to leave the examination and call back for a follow-up appointment after the lapse of several months. If these appointments are postponed, you may find that several assessment periods have become time barred because more than three years have passed since that quarter being audited. However, the statute of limitations for examining a quarterly return can be voluntarily extended beyond the three-year period by the employer-taxpayer signing an extension. The decision whether or not to sign an extension can be a tactical tool if you know how to use it.
The EDD can never force you to extend the statute of limitations for any period under examination. If you choose not to extend the statute of limitations, there is absolutely nothing the EDD can do except to issue a Notice of Assessment. This is true even though the EDD examination is incomplete and the auditor wishes he or she had an extra six months or so to complete the job.
It sometimes can be beneficial to grant an extension if the EDD will grant certain concessions in order to grant them additional time. For example, you may request, and have the EDD agree, not to assess any penalties. If the examining agent refuses to grant any concessions whatsoever, why should you sign an extension giving him or her more time? The answer is you should not.
If you and the auditor cannot agree at the end as to the assessment reasons and/or amount, you can ask for a meeting with the supervisor to discuss it again. If that does not work you can then petition after EDD makes the final assessment. This time to petition is limited so act quickly to protect yourself and your assets.
MORAL
Remember this is not legal advice and you absolutely should consult your CPA or attorney when being audited and either or both should be at any meetings or act on your behalf.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
