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What is a verification EDD audit?

On: July 17, 2020

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Living in California means that you will face a certain type of audit at least once in your business career. The Employment Development Department, or EDD, has regular and random audits for those whom it serves and pay taxes for it. They deal with payroll matters and make sure that workers are not being exploited or taken advantage of. The verification audit is a standard audit, but it 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. What do I need to know about a verification audit? When it is your time to be flagged for a verification audit from the EDD, you will need to get your records out and make sure that you are prepared. You will first receive a package that will outline everything the EDD wants as well as any other details you will need to know.  Not only will this distinguish what type of audit it is, as the other audit you can face from the EDD is targeted and much more serious.  You will not only need to keep payroll records providing a true and accurate account of all workers (employed, laid off, on a leave of absence, or an independent contractor) and all payments made, but you may need other invoices, employee contracts, and other company information. You may also need other items such as the payroll registers, employee registers, general ledger registers, general employment questionnaire, and wage information for at least three years back. The EDD goes back from at least three years to all the way up to six years, depending on the circumstance, so being prepared and keeping records going back is vital to your business. What to expect from a verification EDD audit? After completing the package sent to you, you will then begin preparing for the verification payroll test. It is important to get a lawyer for such matters, as they will make sure that you are correctly going through the audit and keep you from adding more fees to your day. A lawyer is also up to date on all the criteria and procedures that you may not know about. Make sure to call Leading Tax Group and don’t attempt to do it yourself. Then, you will have to do the payroll verification test, which looks at your data and documents and makes sure that everything is being done correctly. They will compare what you have previously turned into them with what you have on file and make sure that everything matches. They will also check the paycheck and payrolls for regular employees and contractors who may be on file. They will pick an employee at random and make sure everything lines up properly. They will also go over everything needed to match up all the payroll records they have on file, which if you have done everything you are supposed to, should be a piece of cake. If not, ask a lawyer for help and they will point you in the right direction.
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