Tag Archive for: John Milikowsky

edd can audit small businesses back 12 quarters

Employment Development Department (EDD) performs many services, but their primary role that impacts small businesses is collecting and auditing payroll taxes. Employers pay payroll taxes for W-2 employees, but not for 1099 independent contractors. 

The line between an independent contractor and an employee was more concretely defined with the implementation of Assembly Bill 5 (AB-5). A worker must meet all three of the following criteria to be classified as an independent contractor: 

  1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work
  2. The worker performs work that is outside the usual course of the hiring entity’s business
  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Misclassification mistakes can oftentimes be exactly that – an innocent mistake. However, there are also instances where businesses have taken advantage of classifying employees as independent contractors to avoid paying payroll taxes and investing in employee benefits. This was the case with Dynamex– read the full story here

Purposeful and accidental employee misclassifications strip employees of their benefits and the government of their tax funding. In order to protect both, EDD performs misclassification audits on businesses that are flagged for potential misclassifications. The top 4 EDD audit triggers include

  1. Independent contractors filing for unemployment
  2. Employee complaints to EDD
  3. Late filing of taxes
  4. Randomized verification audits 

If EDD sends you a notice in the mail notifying you they want to audit your business, there is a limit to how far back they can audit. 

 

EDD Audit Statute of Limitations 

The government agency can audit your business EDD can audit your business 12 quarters back from the quarter in which the audit is started, however, audits can go back up to eight years in some cases. 

Watch our full video below to learn more.

 

Only cases involving fraud or intent to evade payroll taxes are not limited by that statute of limitations. In these instances, EDD can audit the business as retroactively as they deem.

Section 1132 of the Unemployment Insurance Code states: 

“Except in the case of failure without good cause to file a return or report, fraud or intent to evade any provision of this division or authorized regulations, every notice of assessment shall be made within three years after the last 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 the deficient return or report is filed, or was due, whichever period expires the later. An employing unit may waive this limitation period or may consent to its extension.

In case of failure without good cause to file a return or report, every notice of assessment shall be made within eight years after the last day of the month following the close of the calendar quarter during which the contribution liability included in the assessment accrued. An employing unit may waive this limitation period or may consent to its extension.”

 

How Long Do EDD Audits Take?

EDD audits typically last about three to nine months depending on a myriad of factors:

  • How prepared and organized are you for the audit 
  • If they find more information that may need to deepen the investigation 
  • How backlogged the department is

Your auditor will have to review your records, federal income tax return, W-2s, payroll tax returns, 1099 forms, financial statements, and more. They also interview your 1099 independent contractors to cross-verify information. 

The more contractors you have, the longer the audit can potentially take. 

For more information on what to expect during an EDD Audit, read our article here.

 

edd can audit back 3 years

John Milikowsky is a local San Diego Tax Attorney

Meet John Milikowsky 

John Milikowsky is the owner, founder, and managing attorney of Milikowsky Tax Law in La Jolla, CA. As an attorney, he is passionate about representing business owners in the face of government audits, specifically EDD, IRS, SBA, and CSLB audit cases.

A former business owner himself with 28 employees, multiple storefronts, large inventory, and international trade, John understands how to advocate for his clients in the face of a government audit because he knows the day-to-day runnings of a business. 

According to Mr. Milikowsky, if a government agency is going to “select your tax return for an audit, you need someone who is going to understand your business operations and understand how your financials are put together.” 

In 2015, John was selected by the Union Tribune’s San Diego Reader’s Poll as one of the top five best tax lawyers in San Diego. He is known for his relentless defense of each client in federal and state criminal investigations to protect his client’s civil rights and provide financial security. Tax law cases John can represent include: 

  • Sales tax audits
  • Payroll tax audits 
  • IRS tax audits 
  • International tax matters
  • Criminal tax matters 

Learn more about John in our video below:

The Golden Screw Story

John’s passion for working meticulously through his client’s audits was seeded back in 1987 as a young boy. Growing up, John spent his summers sitting in the back storeroom of his parents’ lighting store, sorting an oil barrel filled with a variety of different screws each day.

At first, this mundane duty opened the floodgates of questions for young Milikowsky about why he had to sort screws instead of partaking in more fun activities. Although he never made an inch-worth of progress sorting the screws in the barrel, he made a choice in the middle of the summer to channel his negative emotions about sorting the screws into sorting them well in fast.

Looking back, John remembers thinking, “I could have been furious, resentful… victimized by the mundane monotonous task set in front of me… or, I could do it well and fast. I could be the best at screw sorting… It’s possible that hindsight has put that perspective on my young experience…” 

He continues, “But certainly, as I navigated my first few years of audits with my Tax Law clients, as they handed me THEIR metaphorical oil-barrels filled with numbers… profit and loss statements for three, four, five years, receipts faded with time and transactions whose recipients had long gone out of business, I came to appreciate that summer of sorting. That training in detail work, that patience for sifting through the most minute details.

I discovered that my passion was for the detective work it took to uncover the one piece of information that made all the rest of a company’s business narrative fall into place. I realized it was like finding a needle in a haystack, a diamond in ice… a golden screw…

And that through that kind of attention to detail, I could help people in their moments of crisis, at their crossroads. Through diligence, expertise, and attention to detail, I can help save people’s businesses, their families, and often, their sense of humor.”

Meet the Team at Milikowsky Tax Law

Our team here at Milikowsky Tax Law is the bedrock of our firm. Every member is equally important regardless of their job function.

We are former business owners and managers, which gives us incredible insight and experience to understand the internal and external workings of your business to provide relentless, effective representation in all tax matters.

As a dedicated office, we will be with you every step of the way, scrutinizing the details of your case and strategizing on effective solutions.

We are here to help you and your company resolve an IRS or EDD audit, defend a criminal tax investigation, minimize your risk of being audited, or help reduce a tax balance. With hundreds of completed cases behind us, we know how to navigate the world of tax law expertly and smoothly.

The Milikowsky Tax Law team has also developed a proprietary audit metric technology to help us get to the bottom of any tax issues. With our help, you’ll never have to worry about tax season again.

We pride ourselves in being:

  • Experts
  • Navigators
  • Personable 

Watch our video below to know our team members!

Meet Lauren Suarez 

Lauren is a Senior Associate Attorney here at Milikowsky Tax Law. She received her Master of Laws – LLM, Tax Law/Taxation from the University of San Diego.

In our office, Lauren has worked for almost two years with personal and business tax controversy issues for government agencies such as IRS, FTB, CDTFA, and EDD. She also assists with financial planning and incorporation for domestic and international clients.

Meet Meghan Monte

Also known as our office’s EDD queen, Meghan is another integral part of our team. She graduated with a Bachelor of Business Administration, Finance, and Entrepreneurial Studies from Rider University.

At Milikowsky Tax Law, she has worked as a paralegal and financial analyst for over three years. Day to day, Meghan is in charge of financial analysis and setting up EDD audits.

Meet Solin Zora 

Solin has worked for our office for the past two years as a Senior Client Services Assistant. She received her bachelor’s degree at San Diego State University. 

Solin says she feels “appreciated and respected for what I bring to the firm. The flexibility to attend to family matters if necessary and the encouragement to come up with my own ideas and to provide input to the team is very important to me. We have a great, supportive team that makes work enjoyable. At Milikowsky Tax Law every day is different, and it is a constant adventure!”

Visit our page here to learn more about the team here at Milikowsky Tax Law. 

The team at Milikowsky Tax Law is fully prepared to help protect businesses facing government audits.