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Federal Employment Tax Issues?
State Employment Tax Issue?
Employment Development Department also know as the EDD.
At Bismark Tax we represent clients in EDD audits.
The Employment Development Division or EDD is one of the largest tax collection agencies in the United States and is charged with collecting and enforcing employment taxes. Only the Internal Revenue Service collects more payroll tax dollars than EDD. During 2013, the EDD audited and/or collected more than $56.7 billion in employment taxes from over 1.3 million employers. To ensure compliance with the tax laws, the EDD audits employers records.
So what is an EDD Audit?
Great question. The EDD informational flyer given to employers at the beginning of an EDD audit states
“The payroll tax audit provides education outreach to employers regarding their state employment tax obligations and ensures that benefit coverage is provided for workers who are entitled to such coverage under the law.” http://www.edd.ca.gov/pdf_pub_ctr/de231ta.pdf
That doesn’t sound too bad, right? The EDD only wants to teach employers about tax topics such as, who is an employee and who isn’t. That’s so kind of them.
Unfortunately, the EDD Audit Manual has a different, more accurate, definition:
“An audit is a systematic examination and verification of a subject employer’s books and records, conducted in accordance with auditing standards and procedure. ” EDD Tax Audit Guidelines DE 40 p. 18
That’s the correct definition.
In 2013, the Tax Audit Program conducted 6,749 audits and investigations, resulting in assessments totaling $155,808,394, and identified 102,479 unreported employees. DE40 p. 18. That means each audit conducted in 2013 had an average assessment of over $23,000. ($155,808,394 ÷ 6,749)