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Surge in Unemployment May Lead To Edd Audits

With the current coronavirus (COVID-19) pandemic and the California stay-at-home order in place since March 19, 2020, several small California businesses have been forced to close doors. Consequently, hundreds of thousands of workers have been fired or furloughed.

The California Employment Development Department (EDD) has been overwhelmed with claims for unemployment insurance, as the numbers of Californians applying for the benefit increases every day. The receipt of unemployment insurance benefit is a right of California employees and those workers that are classified as independent contractors do not enjoy the same rights.

Nonetheless, on April 20, 2020, the EDD posted a clear invitation for independent contractors to claim they have been misclassified and should have been, in fact, treated as employees, which makes them entitled to several benefits, including, unemployment insurance. But, what does that mean for the businesses that hired those workers as independent contractors? An 100% chance of receiving a payroll tax audit notice from the EDD.

The filing of an unemployment claim by an independent contractor claiming to be, in fact, an employee is the number 1 reason why businesses get audited by the EDD in California. With the EDD encouraging independent contractors to file for unemployment insurance, the number of payroll tax audits will sky-rocket, harming hundreds if not, thousands, of small businesses that are already suffering from the coronavirus (COVID-19) pandemic.

If you own or operate a small business in California that uses/used the services of independent contractors and you have been impacted by the coronavirus (COVID-19) pandemic, you should be aware of the potential risks and consequences of being audited by the EDD for employee misclassification.

At Milikowsky Tax Law, we have the tools, the knowledge and the expertise to first identify the potential risks of an EDD payroll tax audit and guide you through the entire process. Don’t fight the EDD alone, Contact us at 858-450-1040 to discuss your options.