California EDD Audits and Investigations: What to Expect
As the largest tax collection agency in California, the Employment Development Department (EDD) is charged with collecting payroll taxes from over 17 million workers every year, accounting for over $31 billion of California’s tax system. The agency also offers an array of services to California residents under the Job Service, State Disability Insurance (SDI), Workforce Management, and Labor Market Information programs.
W-2 vs 1099 - Download the guide to AB-5 and the worker classification rules
What is California EDD?
Because of its tremendous responsibility, the EDD cracks down hard on those who fail to file the right forms or make appropriate payroll tax withholdings. When dealing with the EDD, there is little room for small business owners or employers to make a mistake.
While this can feel intimidating to you as a small business owner, when it comes to EDD audits, knowledge is power. Keep reading to learn all about EDD audits and discover how the Milikowsky Tax Law can help you navigate even the most complex of cases.
EDD Obligations for California Employers
Under California law, you are required to routinely file sales tax returns on a regular basis, though the frequency depends on your specific situation. Additionally, you are responsible to make sure you are applying withheld taxes to unemployment insurance, employment training, state disability insurance, and personal income. California EDD problems may arise from failing to file your tax returns on time, or failing to withhold the appropriate taxes.
Spend time acquainting yourself with the state laws to make sure that you are filing correctly and on time. Check out our resources below to learn more.
Reducing Your Risk of an EDD Audit and Addressing Errors
If you make a small mistake when filing your business taxes, all is not lost. There are ways to address errors and make amendments to your tax return, to help reduce your risk of an EDD audit. Be sure to take action to amend your tax return as soon as you become aware of a need to do so. If you need guidance, reach out to a professional tax attorney for help addressing errors on your return.
Properly Classifying Workers
Ensuring that all of your workers are classified correctly is one of the strongest ways to reduce your risk of an EDD audit. A large portion of California EDD problems are caused by worker misclassification. It can be confusing for small business owners, especially if you are just starting out, to accurately determine whether a worker is an employee (receiving a W-2) or an independent contractor (receiving a 1099).
We have written extensively about employee classification to help business owners navigate the laws. Our blogs explain what factors make a worker an independent contractor vs. an employee, who is eligible for unemployment insurance, what to know when you hire independent contractors, how to use Form SS-8, and much more. Learn more through our detailed resources below.
- Small-Business Hiring: Who Should Be Your First Employee?
- Hiring Your First Independent Contractor: What You Should Know
- California EDD: 1099 Contractors vs Employees + How to tell the difference
- EDD: 1099s vs Employees, Don’t Risk Misclassification
- 5 Mistakes Businesses Can Make When Hiring and Working With Independent Contractors
- What is Form SS-8 and When Do I Need to Use It?
- Employees Vs. Independent Contractors: How Should You Classify?
- 10 Myths of Worker Misclassification (Independent Contractor or Employee)
Navigating an EDD Audit: What to Expect
If you have been contacted by the California EDD, you don’t have to go through the process alone. Dealing with the EDD can be nerve-racking and complicated to say the least. By working with a skilled EDD audit attorney, you can ensure you are well protected in your case with this powerful government organization.
Here are some resources to help you understand what to expect and how to handle your situation.
San Diego EDD Audit Attorney
Proper legal guidance can keep you out of trouble and save you thousands in liabilities. It is in your best interest to retain a dedicated tax law firm with experience handling complicated payroll tax matters.
As experienced San Diego EDD audit attorneys, the team at Milikowsky Tax Law has successfully represented numerous clients in disputes with the Employment Development Department.
Our firm can handle the following kinds of disputes with the EDD:
- Failure to deposit or file your payroll taxes
- Liens placed against your business or personal properties
- Threats to shut down your business
- Matters that require action or appeal in court
- Employee and contractor disputes
Contact Milikowsky Tax Law Today
If you are struggling to resolve California EDD problems while trying to keep your small business running, look no further than our team. At Milikowsky Tax Law, we are committed to protecting our clients’ best interests and providing expert legal counsel. We understand that dealing with any government agency, particularly the EDD, can be daunting. Working with one of our San Diego EDD audit attorneys will provide you the defense you need to protect your business.
Call our office at (858) 450-1040 and speak with a dedicated member of our team.
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