EDD Payroll Audits are usually triggered when an individuals who worked for you as a contractor files for unemployment or disability benefits.
You have a strict deadline to appeal an assessment or fully pay it. Failure to do either one could lead to penalties and/or loss of right to appeal.
Business owners may be personally liable to pay for tax assessments against their business.
Most EDD audits are caused by businesses who pay workers off the payroll. Most commonly, this is caused when you pay someone as a contractor.
Audits may occur when business owners fail to pay themselves wages or pay themselves below their fair market value.
Failure to issue 1099s to individuals who work as contractors may leave you responsible to pay their personal income tax following a payroll audit.
Out-of-state employers may be audited if they work with individuals who provide services in California.
All California workers are presumed to be employees. The law places the burden of proving otherwise on the employer.