EDD Audit Attorney for Employers
Our EDD audit attorney only represent companies and businesses, not employees. Our California payroll tax audit defense attorney has over 25 years of experience winning!
Our EDD audit attorney only represent companies and businesses, not employees. Our California payroll tax audit defense attorney has over 25 years of experience winning!
By Douglas Wade, Attorney
Email | Call (800) 484-4610
Have a quick question? We answered nearly 2000 FAQs.
The aim of conducting an audit is to uncover any discrepancies and ascertain whether the employer has fully met their obligations regarding payroll taxes as mandated by California law. The EDD functions as a tax agency tasked with the collection and enforcement of employment tax regulations. Employers are advised to engage the services of an EDD audit attorney when dealing with the EDD to safeguard their company’s interests.
The EDD stands as one of California’s largest departments, serving a vast number of residents in the state. This agency offers a range of essential services, including:
An audit is an examination of payroll tax records to ensure employers are complying with the California Unemployment Insurance Code (CUIC). It verifies accurate reporting of payments to employees, proper worker classification, and safeguards workers’ entitlements to benefits. If your business has received an audit notice, it is crucial to reach out to our EDD audit attorney for expert defense.
The primary objective of an audit is to confirm that employers are appropriately categorizing their workers and fulfilling their correct employment tax obligations. Essentially, these audits serve as a means for the EDD to verify that companies are meeting their payroll tax obligations while ensuring employees receive their entitled benefits. Challenges in payroll tax matters often arise when a worker, initially labeled as an independent contractor, files for unemployment insurance. Any type of California business may be subject to this audit, underscoring the importance of engaging an EDD audit attorney to protect company interests.
Throughout an audit, the EDD scrutinizes whether an employer exerts control over a worker’s methods, manner, and means of performing tasks for the company. These terms may be complex for employers to grasp without the guidance of an EDD audit attorney. As per the California Supreme Court, substantial evidence of an employment relationship includes the ability to terminate employment at will and without cause. Furthermore, a worker’s ability to demonstrate independent business operations can sway the EDD’s determination towards contractor status rather than employee status.
Post-audit, the EDD may conclude that the employer appropriately classified workers and accurately reported their compensation. However, if evidence suggests otherwise, the employer may face outstanding taxes, accompanied by interest and penalties. Audits typically cover the most recent twelve calendar quarters, equivalent to three years. In instances where an employer has not filed returns within that period, the audit scope may extend further back. An EDD audit attorney can support employers in limiting the audit duration to three years.
When an employers encounter an audit, seeking guidance from an EDD audit attorney is recommended. Nakase Wade, with their expertise in EDD matters, can aid employers and companies in achieving favorable outcomes during audits. The legal team at Nakase Wade is well-versed in defending companies against audits and will vigorously advocate for our client’s best interests.
When an employer receives a notice of audit from the EDD, they should seek help from an experienced EDD audit attorney, who can assist with all legal matters related to taxes and employment, as well as potential appeals.
It may seem like a challenge to find an experienced and trustworthy EDD audit lawyer, especially considering the pressure that a tax problem can put on an employer. After all, retaining an attorney can be expensive, and employers may fear that they are spending valuable money and time without a guarantee of success in their legal battle. For this reason, it is important that an employer do careful research about EDD audit lawyers in their area. Also, it is important to look for an EDD attorney who will work collaboratively with the government, rather than combatively. This strategy offers for more positive results and can minimize your liability for EDD taxes, fines, and penalties.
In addition to EDD audit issues, an experienced attorney will be able to assist with the following tax-related issues:
We published an article answering many FAQs concerning EDD audit. Nakase Wade, serving California, is devoted to putting employers’ interests first and fighting for a positive outcome in all EDD audit, whatever the odds and however complex the tax issue at hand.
The initial step is to seek the assistance of an EDD audit attorney. The EDD is notably more assertive in its audit process compared to the IRS. An audit is conducted to ascertain whether a business has accurately remitted taxes. Typically, this audit arises when the California Employment Development Department investigates a business’s payroll tax records to determine if a worker has been misclassified as an independent contractor rather than an employee.
In the event that an employer does not agree with the findings of an audit, they have the option to challenge it by engaging an EDD audit attorney to initiate an appeal, referred to as filing a petition for re-determination. This will lead to a review of the case by an Administrative Law Judge. During the hearing, the judge will assess the evidence to determine whether the employer exerted control over the worker’s methods, manner, means, and execution of tasks, or if they satisfy the ABC test criteria. While these hearings are typically conducted in person, they may also take place through video conferencing. This hearing provides the employer a significant opportunity to contest the audit results without immediately remitting the tax, and potentially seek a refund.
During the audit hearing, an Administrative Law Judge will pose questions to the employer, review pertinent documents, and render a decision on the appeal. It is imperative for employers to be represented by an EDD audit attorney at this hearing. The Administrative Law Judge will provide an overview of the procedures and issues under scrutiny.
In preparation for an EDD hearing, an EDD audit attorney will aid employers in gathering evidence and readying themselves to testify. In this scenario, employers must present additional proof and question the auditor. The judge presiding over the hearing will examine documents, conduct inquiries, and reach a verdict. Should an employer disagree with the outcome, they retain the right to appeal to the California Unemployment Insurance Appeals Board.
For instance, if the matter revolves around worker classification, an employer should familiarize themselves with how California distinguishes between employees and contractors, as well as the exceptions covered by the ABC test. This task can prove challenging for employers without the guidance of an EDD audit attorney.
Our EDD audit attorney emphasizes a few key considerations to recall before an audit hearing:
While no employer relishes the prospect of dealing with a stressful audit, having an experienced tax and EDD audit attorney by their side can make the process as smooth as possible. Failing to remit owed employment taxes may lead to personal liability for stockholders and officers, underscoring the importance of seeking legal guidance to navigate the audit and any subsequent appeals. Nakase Wade EDD audit attorneys are equipped to assist employers in locating the appropriate evidence and witnesses to yield a favorable resolution in a payroll tax dispute for employers.
There are two kinds of EDD audits, one of which is triggered randomly and another which is triggered by cause.
The first of these is known as a Verification EDD audit. This type of audit is sent out at random, meaning there is no assumption of negligence or wrongdoing. Instead, the government selects employers at random, or based on other standard guidelines.
The criteria for random selection include the following:
The second type of audit is much more serious in nature. In a Request EDD audit, an employer has been specifically chosen for investigation. This audit is triggered by information that either EDD investigators or outsiders provide to the agency. These outsiders are often employees or former workers. If your company received a notice of audit from California EDD, please contact our EDD audit defense attorney for a free consultation.
When a company is selected for an audit, the EDD will send the following documents to the employer:
The EDD could also provide a request to lengthen the statute of limitations. It is crucial that an employer facing an EDD audit contact an attorney. After the business has been notified of an EDD audit, the employer must start gathering payroll records. It is important to be organized and prepared in order to reduce the chance of receiving fines. An employer should focus on the following areas:
Prior to an audit, an employer should review the conditions and terms of any written contracts between their business and independent contractors. Our EDD audit defense attorney can help analyze all the documents to prepare for a vigorous defense. If the company does not have any agreements in writing with their contractors, they should endeavor to document these agreements right away. This is because the EDD looks at whether the employer and contractor’s relationship may be defined as principal-independent contractor or employer-employee.
The EDD will specifically look for certain provisions in written contracts that indicate the relationship is not employer-employee. Red flags include having the contractor work at certain times of day, demanding attendance at training or meetings, asking for a timesheet, and keeping the contractor for working for other employers.
An employer will be in a better position with the EDD if they can show that any independent contractors own and run their own businesses separate from that of the audited company.
This kind of evidence may be found in a Form W-9, a letterhead, invoice, business card, or business license for each contractor that services the company. It is best to get these records before an audit occurs due to time constraints.
It is important for an audited company to file their employment tax returns on schedule. Lateness shows poor financial organization. It may also result in a tax liability for another quarter.
Should the EDD determine that a company misclassified an employee as an independent contractor, then the agency will look at what money was paid to those individuals. This assessment will involve California’s four employment taxes, in addition to fines and interest. Personal income tax is generally the biggest assessment. However, if a business properly filed and gave the correct 1099 to their contractor, then the employer may provide a signed document containing this information. The EDD will subtract certain penalties, which can add up to more than half of the assessment.
If a company paid an entity or person in cash, then it should be careful to keep records of these transactions, including:
If a business used cash to pay an entity or individual but cannot provide a legitimate reason for the use of cash, then the EDD will probably assess payroll taxes on the value paid.
After an employer has gotten their records organized and has reviewed them with their EDD defense lawyer, they will then meet with the EDD auditor. Assuming the records are properly organized and present, this stage of the process should be fairly simple. The auditor will review the documents, then make a determination, which will include possible penalties and fines. The business owner will be given the chance to look at the assessment and choose whether to accept the decision or appeal.
In sum, while an EDD audit may be worrying, with the help of an experienced employment and EDD audit attorney, a company can minimize its tax liabilities, and reduced penalties.
Have a quick question? We answered nearly 2000 FAQs.
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