The EDD has broad powers to examine a taxpayer's books and records and to require the appearance of the taxpayer or third parties. A typical controversy between the taxpayer and the EDD often centers around "status determinations," i.e., the classification of workers as employees instead of independent contractors.
EDD audits often result in penalties being assessed. The following are the most common penalties asserted by the EDD:
- Failure to pay;
- Failure to file a return;
- Improper return files;
- Lack of good cause;
- Negligence;
- Fraud;
- Failure to file annual return.
The EDD has no interim appeal process similar to the IRS's Appellate conference or the FTB's and BOE's information appeals process. Rather, the only appeal is formal and to the California Unemployment Insurance Appeals Board (CUIAB). Informal conferences are available with the auditor and group manager.
There are time limitations for making assessments. Actions by the EDD must be taken on or before the last working day which falls within any statutory limit unless a waiver or an extension had been obtained.