Long-term closures caused by COVID-19 have led many companies to make massive cuts, mostly by furloughing or laying off their employees. However, qualified companies have the option to enroll in the EDD Workshare Program, which allows a business to pay full salaries to its workers who have had to reduce their hours due to COVID-19.
Companies can use the loans provided by the EDD Workshare Program to pay their workers a prorated percentage of their Unemployment Insurance benefits. This seems like a beneficial program for any company that would like to avoid layoffs and maintain the same workforce who have already been trained and will be eager to work once they can.
However, applying to the Workshare Program could result in an EDD audit, at some point down the road. The California EDD audits companies to ensure that they are adhering to California’s payroll tax laws and are collecting payroll taxes from their employees. The taxes the employer is responsible for include unemployment insurance and employment training tax.
The EDD conducts audits to check if the employer was fully paid the taxes they owe under California law. Because the Workshare Program utilizes the Unemployment Insurance payments, the EDD must ensure that the company has paid the taxes they owe.
In a case where your company is applying for the Workshare Program, the EDD would likely conduct an audit for verification purposes. This audit would allow the EDD to confirm that you have adhered to the California tax law.
If you are facing an EDD audit, our best advice is to consult a tax lawyer. We at Milikowsky Tax Law can help! Contact us to see the best way to prepare for an EDD Audit.