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What to keep in mind for an EDD audit

On: July 10, 2020

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Some audits in California are like traffic, unavoidable.  Being a business owner means that you will end up dealing with the Employment Development Department, or the EDD, which handles all payroll matters, including taxes and employee pay. They have different types of audits which can mean different things for you depending on how you handle them. Here is what to keep in mind for an EDD audit. There are two types of EDD audit The EDD audits all businesses regardless of how you operate, but which one is the real question. The standard audit is a verification audit, which is a random, automatic audit from the EDD that every business owner is subject to in California if you have employees. It depends on your business size and how many people you employ, but a verification audit can happen at random at any time. A request audit is much more serious and is specific from the EDD. This is usually because the EDD wants to look into either more information or think there may be something going on. They probably think you are doing something wrong, so it is important to call a lawyer first thing. Start keeping good records Both audits will require about three years of records going back, so make sure that you have a reliable system going at least that far back, however, more is encouraged. Having things like the payroll registers, employee registers, general ledger registers, general employment questionnaire, wage information for particular time frames, and all other employee pay materials. The EDD can audit any materials it deems necessary, and not having them or having incomplete records can make your day a whole lot worse by possibly getting you fined. Keeping good records is just a good business practice to have and one that will save you so much time and energy in the long run by ensuring that you are following everything as needed. Get a lawyer Make sure that you always call Leading Tax Group and don’t attempt to do it yourself. Unless you are a tax lawyer or went to law school, having legal representation is very important. Not only are they up to date on everything, but they are going to have done EDD audits a bunch of times before doing yours and the more experience the better. By having a lawyer go through things with you and helping make sure that you walk away from the EDD audit like a champ is important. They will also be sure to know anything that you should or shouldn’t do when it comes to your audit. Surviving an EDD audit The auditor is not your friend and is trying to fine you. It is their job, but it is your job to make sure that you are doing your part to not warrant any fines. Being solid with your records and always reviewing your employee contracts will go a long way to making sure that you are safe through your audit. Don’t be scared. Audits are something that you will have to do to survive and that’s okay, they aren’t super hard.
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