Providing Seasoned Legal Guidance In California For EDD Audits
Most audits by the California Employment Development Department (EDD) examine whether individuals who have been classified as independent contractors are really employees. This analysis involves several different factors and can lead to disastrous results for the underlying company should a determination be made that the workers should be reclassified. There are a number of strategies to consider when defending this type of audit.
Attorney Robert T. Leonard understands that EDD audits can have serious implications for you and your company. At the Law Offices of Robert T. Leonard, APC, he gives you direct attention and provides the sound advice and potent legal strategies that these matters require.
What To Know About EDD Audits
EDD audits, conducted by California’s Employment Development Department, are payroll tax audits aimed at ensuring businesses comply with state employment tax laws. These audits verify that businesses:
- Accurately report employee wages
- Withhold appropriate taxes
- Classify workers correctly
For businesses, an EDD audit can mean a thorough examination of payroll records, potentially leading to adjustments in tax liabilities or penalties if discrepancies are found. To approach an EDD audit effectively, businesses should:
- Maintain organized and accurate records
- Respond promptly to audit requests
- Ensure compliance with employment tax regulations
Engaging a lawyer can be beneficial, as they can provide guidance on legal obligations, assist in preparing documentation and represent the business during the audit process. This helps to mitigate potential issues and ensure a fair outcome.
EDD Audits And The IRS
At the conclusion of an EDD audit, your audit information is sometimes made available to the IRS. This can trigger an additional audit and further tax consequences, so it is imperative to retain the services of an attorney who is adept at resolving both state and federal tax controversies.
Personal Attention And Custom-Tailored California EDD Audit Representation
At your first consultation, you will meet with attorney Robert T. Leonard, and you will continue to work with him until the conclusion of your EDD audit. You will never be passed off to a less-experienced associate or non-lawyer advocate. Mr. Leonard will personally counsel you about all issues relevant to your case, including:
- In the case of an unfavorable audit result, whether an appeal of the EDD’s audit is in your best interests.
- How a worker’s classification as an employee versus independent contractor can affect your business’ tax liability.
He can also review current independent contractor agreements and assist with the preparation of independent contractor agreements.
What Triggers An EDD Audit?
Several factors can trigger an Employment Development Department (EDD) audit. These include:
- A discrepancy between your reported payroll and your industry’s average.
- Inconsistencies in your tax filings, such as late submissions or errors in reported wages, can raise red flags.
- Information from whistleblowers can prompt an audit if they allege wrongdoing.
Finally, businesses selected randomly as part of a general compliance check can also face audits.
What Are The Consequences Of Failing An EDD Audit?
Failing an EDD audit can lead to several adverse consequences. The most immediate is often financial penalties, including assessments for unpaid payroll taxes, interest and penalties. The EDD may also reassess your worker classifications, potentially leading to additional tax liabilities. A failed audit can result in increased scrutiny in the future, with the EDD conducting more frequent audits. In severe cases, businesses may face legal action related to tax evasion or fraud.
What Steps Should A Business Take Immediately After Receiving An EDD Audit Notice?
Upon receiving an EDD audit notice, a business should take immediate and strategic steps:
- Carefully review the audit notice to understand the scope and focus of the audit.
- Gather all relevant payroll records, tax filings, employee information, and any documentation related to worker classification.
- Consult with an experienced employment tax attorney or a qualified accountant specializing in EDD audits.
Cooperating with the EDD is essential, but do so under the guidance of your legal or accounting advisor.
Contact A Tax Audit Lawyer For A Free, Confidential Consultation
If you have received an audit notice from the EDD, let an attorney help you understand what you can expect during the audit and provide you with information about all of the options available to you. Call 818-485-2115, or contact Rob online to schedule a free consultation. From his Westlake Village office, he serves clients in the San Fernando Valley and Los Angeles, as well as throughout the rest of California and the United States.