As a business operator in California, you may know of the Employment Development Department (EDD). It collects payroll taxes and keeps employment records of California workers. In addition, the EDD can run tax audits on business-owners that they believe have tax indiscretions. If the EDD audits you and you need additional help, check out these signs you need to hire an EDD tax lawyer now.
You’ve Misclassified Employees
Business-owners can also trigger EDD payroll audits when they have misclassified their employees. When an employee is an independent contractor, businesses do not pay payroll taxes for them. However, suppose that worker claims they’re not an independent contractor (usually discovered when the employee tries to apply for unemployment insurance). In that case, the EDD can launch an audit on the business-owner.
You Have Errors in Time Records
One way for a business-owner to trigger an EDD audit is having errors in time records or other important documents. Time records can track payroll dates, financial statements, and billable hours. Errors in time records can contribute to accidental unpaid wages and further legal document confusion. If you have time errors, it’s essential to tell your EDD tax lawyer so that they’re aware of the situation.
You’ve Failed To Pay Wages
Audits can occur when business-owners fail to pay wages. They can also happen if a business-owner pays below fair market value. Therefore, it’s vital to establish comparable industry figures for your business and pay your employees fairly. Failure to pay correct wages may prompt the EDD to audit you.
You’ve Failed To Issue 1099s
The EDD can audit business-owners who fail to issue 1099s to employees who work as independent contractors. This may leave business-owners responsible for paying the contractors’ personal income taxes following a payroll audit.
As a business-owner in California, you may know of the EDD and its ability to run audits. If the EDD audits you, then you should consider hiring an EDD tax lawyer. Pershing Square Law employs California’s premier EDD payroll tax audit defense lawyers. If any of these signs you need to hire an EDD tax lawyer apply to you, give us a call today.