Depending on which tax authority is auditing you, will determine what the purpose of the tax audit is. For most people who are individuals, they are familiar with an IRS (Internal Revenue Service) or FTB (California’
An EDD employment audit involves the issue of whether your workers are properly classified. More specifically, the EDD wants to make sure you are not wrongfully classifying employees as independent contractors in order to avoid paying employment tax on those workers (With Independent Contractors, the Employer is not required to withhold tax money it otherwise would have to withhold if the worker was an employee).
Moreover, the EDD will check payroll, time-keeping, and related records to make sure everything is in order. EDD will also review your “interns” and “volunteers”
If it turns out that your company did incorrectly classify a worker, there are potential fines and penalties that may be assessed against the company. There is not a bright line test to determine whether a worker is properly classified or not. Rather, there are various different factors that are used to determine whether a worker should be classified as an employee or independent contractor.
If you are facing an EDD audit, you may consider contacting a Tax Attorney experienced in handling these type of issues.
SEAN M. GOLDING, ESQ, EA
Sean M. Golding is one of only a few attorneys licensed in both New York & California and has accumulated 15 years of legal experience. He is also an Enrolled Agent, the highest credential awarded by the IRS. He represents clients worldwide in matters involving Civil & Criminal Tax, Probate, Estate Planning, and International Law. Sean’s clients include U.S. and foreign citizens living throughout the states, as well as abroad. Past and current clients reside in Iraq, Japan, Afghanistan, Indonesia, South Africa, Morocco, India, Pakistan, Taiwan, Nicaragua, Switzerland, Canada, Mexico, Philippines, Hong Kong, and Korea. Sean is currently enrolled in one of the nation’sTop Master of Tax Law Programs at the University of Denver in a distance program designed for experienced professionals. He worked his way through school, graduating University of Denver and Whittier Law School and earning Dean’s List distinction at both institutions. He is the owner of http://www.Goldinglawyers.com and http://www.GoldingTaxSolutions.com