On: August 5, 2022

EDD Experienced Tax Experts Pasadena

If you are in Pasadena and receive a letter in the mail from the Employment Development Department (“EDD”), it is probably not a Christmas card.  Rather, it means that you need to retain knowledgeable EDD experienced tax experts in Pasadena.

EDD

With the California Department of Tax and Fee Administration and the Franchise Tax Board, EDD is one of the three leading state taxation agencies in the state of California.

EDD focuses on payroll taxes.  Thus, if you receive a letter from EDD, it is likely that some issue has arisen with your payroll taxes.  More specifically, you are likely subject to a California payroll tax audit of your business.

Scope of EDD Audits

A payroll tax audit in California generally covers a three-year statutory period, consisting of the 12 most recently completed calendar quarters.  An audit starts with an examination of records for a test year (generally the most recent completed calendar year).  However, the examination may be expanded to include records for the entire time period covered by the audit and in some situations may extend beyond the three-year statutory period.

Records in EDD Audits

You will have to make available at least the following records to the EDD auditor:

• Check registers, check stubs, cancelled checks, and bank statements;
• General ledger and general journal;
• Annual financial statements;
• Cash payments records (pay out slips and vouchers);
• Ownership verification, including city business license, California Department of Tax and Fee Administration number, any license required to operate your business, and written agreements (such as Partnership Agreement or Articles of Incorporation);
• Federal and state income tax returns; and
• Form 1099 series, Federal information returns, and worksheets.

You also may have to provide the auditor the following additional records:

• Payroll records;
• Federal employment tax reports, including Wage and Tax Statement, Form W-2, Employee’s Withholding Allowance Certificate, Form W-4, Employer’s Quarterly Federal Tax Return, Form 941, and Employer’s Annual Federal Unemployment Tax Return, Form 940; and
• State employment tax reports, including Quarterly Contribution Return and Report of Wages, Form DE 9, Quarterly Contribution Return and Report of Wages (Continuation), Form DE 9C, Quarterly Contribution and Wage Adjustment Form, Form DE 9ADJ, Tax and Wage Adjustment Form, Form DE 678, and Employee’s Withholding Allowance Certificate, Form DE 4.

 

Entrance Interview in EDD Audits

Before reviewing your records, the EDD auditor will conduct an entrance interview.  At this entrance interview, the auditor will explain the purpose of the audit and the audit process, gather general information about the operation and organization of your business and accounting records, and answer any questions.

What Does The EDD Auditor Review?

 

The EDD auditor will review your books and records to:

• Verify the business ownership and type of entity of your business;
• Verify that all individuals paid for services by your business have been properly classified as either employees or independent contractors in accordance with applicable law; and
• Discuss any questionable payments made for personal services and the nature of the working relationship(s) with you and the worker(s). Based on the facts obtained from the records, input from you, and discussion(s) with the worker(s), the auditor will determine whether the worker(s) are employees or independent contractors.

The issue of whether a worker is an employee (subject to business payroll taxes) or an independent contractor (not subject to business payroll taxes) can be of critical importance in many payroll tax audits.

Tests in EDD Audits

In addition, if your account has been selected for a complete audit, the following tests will be performed:

• Verification that you have properly reported gross wages and taxable wages; and
• Verification that you have correctly withheld and reported personal income tax for wages paid to your employees.

Exit Interview in EDD Audits

As part of the audit, the EDD auditor will have an exit interview, either in person or by phone, to review the audit findings, identify any other information that should be considered, and attempt to resolve any disputed issues.  If agreement is not reached with the auditor, you may request a pre-assessment conference with the auditor’s supervisor.

EDD Audit Results

The audit will have one of the following results:

• A no-change audit, when no differences are found;
• An overpayment, when a credit or refund will be issued to you;
• An underpayment, when a liability will be assessed to you; or
• Both an underpayment and overpayment.

EDD Appeal Rights

If you are assessed for California payroll tax liability, you have certain appeal rights.

Internal Revenue Service

Please note that EDD can make available to the Internal Revenue Service any information obtained in your audit.

Need to Retain EDD Experienced Tax Experts for EDD Audits

The proper response to receiving notice that your business is the subject of a payroll tax audit is not to adopt a “head in the sand” attitude and ignore the notice.

Instead, you need to take action.  You need to retain representation from an EDD experienced tax expert who has extensive knowledge and successful experience in working on California payroll tax audits and other California payroll tax matters.

Important EDD Questions Require Consultation with EDD Experienced Tax Experts

As described above, there are many elements in the EDD audit process, which lead to many questions.

What records should you provide and what records should you not provide to the auditor?

How can you best establish that a worker who you have classified as an independent contractor is in fact an independent contractor?

How can you best negotiate with the auditor to resolve any disputed issues?

Should you appeal any assessment of California payroll tax liability?

Do you have any Federal tax issues that can be opened by the Internal Revenue Service if EDD shares information obtained in your audit with the Internal Revenue Service?

If you do not handle these issues on a regular basis, you will not have the necessary background to properly analyze and answer these questions.  You need to consult with EDD experienced tax experts to best address these questions.

Leading Tax Group – The Best EDD Experienced Tax Experts in Pasadena

If you are in Pasadena, you need representation by the EDD experienced tax experts (their experienced team consists of a former IRS tax attorney, an experienced payroll tax and sales tax attorney, a retired IRS auditor (of 40+ years), and their own in-house accounting team!) from Leading Tax Group.

Leading Tax Group has the two qualities that are critical to successful representation in California payroll tax audits and other payroll tax matters – they have wide knowledge of the ins and outs of California payroll tax issues and they have significant successful experience in helping their clients with their California payroll tax audits and other payroll tax matters.

With this knowledge and experience, Leading Tax Group is the best EDD experienced tax experts (their experienced team consists of a former IRS tax attorney, an experienced payroll tax and sales tax attorney, a retired IRS auditor (of 40+ years), and their own in-house accounting team!) in Pasadena to assist you with any EDD issue.

Leading Tax Group has a conveniently accessible office in Pasadena at 225 S Lake Avenue, 3rd Floor.

If you are the subject of a payroll tax audit in Pasadena, you need the aggressive EDD experienced tax experts (their experienced team consists of a former IRS tax attorney, an experienced payroll tax and sales tax attorney, a retired IRS auditor (of 40+ years), and their own in-house accounting team!) from Leading Tax Group.

For the best EDD experienced tax experts (their experienced team consists of a former IRS tax attorney, an experienced payroll tax and sales tax attorney, a retired IRS auditor (of 40+ years), and their own in-house accounting team!) in Pasadena, contact