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Here is how to prepare for an EDD audit

On: July 3, 2020

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When you need to prepare for an EDD audit, here are some crucial steps to keep yourself safe. If you own a business in California, then you probably familiar with the Employment Development Department. They are the tax agency that is responsible for all the employment matters in the state. This includes all payroll taxes and other employee payment matters. They have a random system in which you are picked for an EDD audit, however, getting personally picked means you have been singled out for something. Even if you are following all the rules, you’ll have to deal with this audit at some point in your career, so here is how you prepare for an EDD audit. What to expect from an EDD audit First, you will need to find out what type of audit you are facing. A verification audit is a random, automatic audit from the EDD that every business owner is subject to. It all depends on your business size and how many people you employ as to when you get flagged, but a verification audit can happen at random at any time, so it is best to always be prepared. 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 have either gotten a complaint or something was done wrong and they have more questions. In both instances, it is important to remember that unlike the law, tax agencies see you as guilty and want to find you at fault so they can charge you. It is always important to get a lawyer to make sure that you go ahead in the correct manner. Always make sure to call Leading Tax Group and don’t attempt to do it yourself. You’ll first receive a packet with all the details of what you will go through from the EDD.  The EDD audit will require documents from at least three years back, so always make sure to have those on file. Some things you might need include payroll registers, employee registers, general ledger registers, general employment questionnaire, and wage information for particular time frames. Having these and other invoices will be necessary. What happens when the EDD audit begins? First, after getting the necessary documents and talking with legal representation, you must prepare for an interview. Make sure that all your employee and contractor agreements are up to date and accurate. The EDD will look at those during the audit to make sure that everyone is being paid properly and on time.  Creating a practice of on-time payments and solid systems will be good in the long run and in case of an audit, so it is best to start now. As long as everything is in order and you have gone over the necessary documents and payments, you should be good. Always practice or at least go over the process with a lawyer as it is hopefully not their first time handling the matter and they can have helpful advice for how to proceed.  It’s not the end of the world, but without preparing, you could face lots of fines and stress if you are not ready for an EDD audit.   Always make sure to call Leading Tax Group and don’t attempt to do it yourself.
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