Tag Archive for: site sweep

What Every Business Owner Needs to Know:

Starting a business rarely begins with a strategic checklist of all of the resources necessary to run and scale successfully. Rather, many, if not most businesses start because the founder has a passion or skill that is exceptional and in-demand and they grow from there.  Because of this, many business owners find themselves at strategic points in their growth with gaps in resources that are easily avoidable with a comprehensive simple checklist of what every business owner needs to know. 

Take stock of the resources you currently have and compare them to this checklist to see if you have gaps, overlaps that can drain resources, or if you’ve overlooked an important area of expertise. After all, an ounce of prevention is worth a pound of cure.

Your Checklist

Bookkeeper

You’ll need someone to keep track of your expenses and invoices.  Whether that person is in-house and manages your accounts receivable/ accounts payable, or outsourced and sends monthly reports on your cash flow status, a bookkeeper is essential to any business’ operations. 

A great San Diego based resource for bookkeeping is BooXkeeping. This company, started by Max Emma provides bookkeeping services for small to medium-sized businesses. They are a virtual service that serves a variety of industries. 

Certified Public Accountant

Gone are the days of the once-a-year call to a CPA to file taxes.  With great power comes great tax complexity. A once a year conversation is not going to cut it.  You need a CPA who is invested in your holistic business financial health.  

Mid-sized CPA firms such as Encore Partners, and Eakes and Company provide financial insights and strategies beyond simple tax planning and preparation.  Finding a CPA who understands your industry and special situation is a great addition to your team and your financial wellness as a company. 

Payroll Provider

At a certain point, Quickbooks is too simple for your company’s payroll needs. Getting a great payroll provider sounds easy, but with the behemoths dominating the industry many business owners feel they’re just a number.  Payroll is crucial because, as much as you may work because of the love you have for the company, your employees work at least in large part because you pay them.  

Some San Diego resources for payroll include Coastal Payroll and PayrollHUB. Both provide payroll services and human capital management services to let you stay focused on running your business. 

Insurance Provider

Business insurance is complex, expensive, and consequential.  From cyber liability to the industry-specific coverage you may need if you transport goods or provide services across state lines or internationally, proper insurance coverage is essential. 

Finding an insurance company that specializes in commercial coverage and will reach out to you more often during renewal time is not that easy.  From health insurance to EPLI coverage, insurance is a large part of the benefits you’ll offer to employees, and the protection you need for your business. 

Consider a small to mid-sized firm, some we know of here in San Diego are:

  • Benchmark Commercial Insurance offers commercial and personal line insurance for business owners and individuals with complex structures. 
  • Morrison Insurance creates various insurance programs for small to midsize businesses to help you find the greatest value for your dollar. 
  • Competitive Edge specializes in high-risk and construction insurance. The founder, Brenda Jo, is passionate about believing that you are more than the history of your insurance claims 
  • SBMA Benefits provides affordable ACA compliant Minimum Essential Coverage for Applicable Large Employers.

Human Resources

Human resources… Aren’t all resources human resources?  When it comes to compliance, having Human Resources services in-house or fractionally can make the difference between a bad hire becoming a lasting issue and being a blip on your company radar.  

The right HR provider can partner with your company to create manuals, handbooks, and pieces of training to keep you compliant. They also assist in creating operational structures to support healthy company culture and more. 

San Diego HR resources we know are: 

  • Culture Works operationalizes your workforce’s culture by implementing systems, processes, leadership training, and a foster of culture alignment to aid in a smooth operations process. 
  • Possibilities Consulting has outsourced HR services through Ari Saul and additionally, they help develop inspirational leadership, intentional culture, and high-performance teams in the workplace. 

Attorney

You don’t need an attorney until you need an attorney.  From employment law attorneys to civil litigation, finding the right lawyer when you need one will speed the time to resolution and protect you from unnecessary losses.  

Civil litigation attorneys Gupta Evans and Ayres and Employment law attorneys Tencer Sherman are reliable resources in the San Diego area. 

Protecting your intellectual property not only protects your ideas but can ensure that disgruntled ex-employees don’t take your business plan and implement it in a state with no non-compete clauses. Gary Eastman of Eastman IP is a resource here in San Diego.

At Milikowsky Tax Law, we’ve been entrepreneurs ourselves. We know first-hand about the challenges and the excitement of growing a business.  Regardless of your industry, there are structural elements that will help your company grow and manage the fluctuations of staffing, client success, and scaling more easily. 

Think we forgot something? Connect with us and share! 

Want to know when you might need a CPA vs a Tax Attorney? Read our article here

 

What Every Business Owner Needs to Know:

The Difference Between EDD and CSLB audits

Employment Development Department (EDD) and California Contractors State License Board (CSLB) audits both expose your business to fines and penalties if the agency finds you noncompliant with the strict regulations and policies they have in place for classifying 1099 independent contractors. 

Both CSLB and EDD perform site sweeps that can initiate an audit of your construction business.  CSLB is focused on (as their name suggests) licensing, whereas EDD is focused on payroll tax compliance.  The effect of an audit from either CA EDD or CSLB is the same: the stoppage of work and potential penalties and back taxes. 

EDD Audits 

EDD audits focus on payroll taxes. When an agency, EDD, CSLB, etc. audits a business, a common audit finding is the misclassification of employees. Employers can hire W-2 employees or independent contractors (1099). 

The difference between 1099 and W2 employees lies in the scope of work and which tax form each receives. Full-time and Part-time employees receive W-2 tax forms. They have a schedule set by the employer and report to their employer for daily tasks. These employees pay their employment taxes on their wages earned usually through the payroll provider who issues their checks. On the other hand, independent contractors receive 1099 forms, are not taxed on income, and have more work freedom as they are self-employed.  Contractors (1099 workers) set their own hours, submit proposals and have multiple “gigs” for different companies. 

The most common triggers of an EDD audit are:

  • An independent contractor filing for unemployment
  • Employee complaint of misclassification
  • Late or inconsistent filing of taxes 
  • Randomized verification audit 

EDD provides an in-depth checklist to guide employers on how to classify employees correctly. 

Worker misclassification 1099 vs W-2

An audit by EDD can lead to criminal exposure because incorrect classification means that  federal and state taxes were incorrectly filed and insurance was not provided when mandated by law. EDD identifying incorrectly classified independent contractors as W-2 employees or vice versa can open your business to fines, penalties, and potential jail time.

According to EDD, industries that run a higher risk of misclassifying workers include: 

  • Construction 
  • Hospitality 
  • Seasonal Industries
  • Technology
  • Healthcare

While you can hire unlicensed workers, they can only perform work under your license.  To work under your license requires they are classified as W-2 wage-earning employees. Correctly classifying employees from the beginning of the hiring process keeps your business compliant and ready for an EDD audit if one should occur. 

CSLB Audits 

CSLB is a government agency that regulates the construction industry and creates policies to maintain health, safety, and general welfare for the public. They provide licenses for independent contractors that stay in compliance with regulations and rules within the state of California. 

Contractors licensed in other states but working in California must apply for a CSLB license to remain compliant. Independent contractors hired and working in California must have a current and valid California license from CSLB to remain compliant with rules and regulations. 

Licenses are not required by the State of California only if the independent contractor is not advertised as a licensed contractor or if the job value including labor and material does not exceed $500. 

Audits performed by CSLB occur without any notification. Anyone can file a complaint or report unlicensed activity with CSLB to audit your business if they suspect suspicious activity of your worksite (including a competitor). Their statewide investigation teams conduct undercover sting operations for construction site sweeps. Agency will appear on the site itself and interview each worker to check for correct employee classification, licensing, and status.  

If you are caught hiring an independent contractor without a license, with an out-of-state license, or are incorrectly classified, you will be open to the fines and penalties of an audit.

The penalties of hiring an unlicensed contractor are hefty. If you are a business and you hire a non-licensed contractor, you may be putting yourself and your business at additional risk. These risks often include lawsuits in the event of injury, fines, and potential jail time.

This year alone, CSLB conducted site sweeps across California that cited 74 people for unlicensed contracting.  

To find out if your current or future independent contractors are licensed, use CSLB’s license check here. The site allows you to verify an independent contractor’s license status by entering a provided license number, or a Home Improvement Salesperson (HIS) registration number. 

How Do I Make Sure My Employees are Correctly Classified?

Is your company hiring independent contractors and subcontractors? Make sure each individual has a valid license during the entire time they are working for you. Sometimes, licenses can expire or be suspended during an active job. 

If EDD or CSLB audits your business and finds unlicensed independent contractors or independent contractors with an expired license, it will result in high fines and penalties. 

Learn more about how got1099 can correctly verify your employees, and send you alerts notifying you if employees’ licenses have expired by clicking the link in bio. 

Get the facts, order a got1099 report for your contractors to accurately assess the status of a worker you want to hire. The report includes verification of license along with notifications for license expiration so you don’t have to keep track of each individual’s license. 

Check this list of industries who are exempt from AB-5 to make sure your business is in compliance here

 

The Difference Between EDD and CSLB audits

Recent Construction Site Sweeps Explained

General contractors who hire unlicensed workers and unlicensed subcontractors put themselves at risk for potential criminal action by the local District Attorney (DA) and they risk receiving a stop work order from California Contractor State Licensing Board (CSLB) if and when that agency performs a site sweep.

 

A site sweep occurs when and one of several government agencies, including CSLB, Employment Development Department (EDD), and the California Labor Commissioner, target a specific local area in which construction is being performed and physically show up on the active site to conduct a site inspection. 

 

During a site inspection, workers are interviewed and EDD or CSLB verify whether they are properly licensed. 

 

These site inspections are random and can occur at any time, there is no forewarning.

 

Even a legitimate subcontractor who is licensed can run into issues if their license becomes suspended. As a general contractor, best practice is to regularly check to confirm all of your workers’ licenses are current. We recommend verifying your workers’ licenses monthly, if not more often.

 

CSLB typically refers their cases to EDD to audit the company and identify whether the 1099 independent contractors should be converted to employees. If you are found to have misclassified your workers as 1099s as opposed to wage-earning W-2s, your company is obligated to pay back payroll taxes and will be charged back penalties.

 

Employee misclassification is a serious issue because certain audit cases can be referred to the local DA for prosecution for insurance (worker’s compensation) fraud. Ensure your independent contractors are classified correctly and updated on their correct licensing requirements to avoid the penalties and fines from a random site sweep. 

 

According to the California Contractors State Licensing Board (CSLB), this year alone, 74 people were cited for unlicensed contracting. CSLB’s article highlights the risk for general contractors who hire unlicensed contractors. This number only considers those cited under a CSLB site sweep, not those caught up in an EDD site sweep.

 

Article below was originally posted on CSLB’s website – to see the original article click here: CSLB article:

Contractors Face 130 Legal Actions After Series of Statewide Stings and Sweeps.

 

Contractors State License Board enforcement operation part of national effort to warn consumers about dangers of hiring unlicensed or uninsured contractors. 

 

SACRAMENTO, Calif. – A series of statewide stings and sweeps conducted by the Contractors State License Board (CSLB) has revealed that unlicensed activity was not slowed by the pandemic. 

 

During the operation, 74 people were cited for unlicensed contracting. One of the many ways unlicensed contractors put homeowners at risk is because they do not carry workers’ compensation insurance, making consumers liable if someone is injured on the job. 

 

“Licensed contractors have proven experience, qualifications and verifiable business credentials to do the job right,” said David Fogt, CSLB Registrar. “This enforcement effort shows that even in an industry thriving after the pandemic there are still unlicensed contractors looking to take advantage of consumers,” Fogt said. 

 

From June 7 to 25, 2021, CSLB partnered with local law enforcement to conduct four undercover sting operations in El Cajon, San Diego County; Montclair, San Bernardino County; St. Helena, Napa County; and in Visalia, Tulare County. Undercover stings target unlicensed contractors, with investigators contacting the suspects through their advertisements. 

 

The suspected unlicensed operators came to the sting locations to place bids on projects including concrete, electrical, flooring, kitchen and bathroom remodeling, landscaping, painting, plumbing, roofing, and tree services. As a result, a total of 56 legal actions were filed and 49 people are accused of contracting without a license. Unlicensed contractors can face penalties of up to six months in jail and/or a fine of up to $15,000 if they bid or contract for work valued at more than $500. 

 

Twenty-four sweep operations of construction sites were also conducted in Fresno, Kern, Kings, Los Angeles, Merced, Monterey, San Benito, San Bernardino, San Diego, San Mateo, Santa Clara, Santa Cruz, and Ventura counties that resulted in 74 legal actions against licensed and unlicensed contractors. Twenty-five of the 74 legal actions were for unlicensed contracting and 30 Stop Orders were issued which halted all employee labor at active job sites where contractors did not have workers’ compensation insurance for their employees. 

 

The enforcement actions were part of a nationwide effort coordinated by the National Association of State Contractors Licensing Agencies designed to make consumers aware of the importance of hiring licensed contractors and the risks of using unlicensed operators. 

 

“Many homeowners are not aware of the financial risks when they hire unlicensed contractors,” Fogt said. “Saving a few dollars by hiring an unlicensed contractor can end up costing a consumer thousands of dollars when the work is not completed or in need of correction.” 

 

During the stings and sweeps, 13 individuals were also cited for requesting an excessive down payment. In California, a home improvement project down payment can’t exceed 10-percent of the contract total or $1,000, whichever is less. This misdemeanor charge carries a maximum penalty of six months in jail and/or a fine of up to $5,000. 

 

During operations, unlicensed individuals were given information on getting licensed and were invited to attend one of CSLB’s Licensed to Build workshops. CSLB also created a new B-2 licensing classification for home remodeling with the goal of promoting the growth of small businesses and increasing consumer protection. 

 

For their protection, CSLB recommends that consumers get at least three bids and check references before hiring someone for a construction job. Consumers can quickly check if a contractor is licensed on CSLB’s online Instant License Check. 

 

From the License Check, consumers can also view the contractor’s individual license page, which indicates if the contractor is carrying workers’ compensation insurance for employees. Contractors without workers’ compensation insurance should not have workers on the jobsite. Consumers can find a list of licensed contractors in their area by using CSLB’s Find My Licensed Contractor.