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ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – COVID-19 AND ITS IMPACT ON EDD AUDITS

By Robert S. Schriebman

2020

Introduction

The EDD is not immune from Covid-19. The EDD has been forced to make fundamental changes on working with taxpayers during the audit process. In this article I would like to share my observations and my thoughts on how EDD audits will be changing as a result of how Covid-19 has impacted all of us.

EDD Audits Are Continuing

Make no mistake. The EDD has not shutdown. We are getting many calls informing us that audits are indeed taking place in the current environment. They are being postponed to May but there is no assurance that we will all be safe and secure from this disease by that time. May is not that far away. I want to give you my thoughts on how to handle these new audits.

EDD’s Auditors Are Working Remotely

I have been working on several audits and with several EDD auditors around the state. All of them are working remotely; most of them are working from home. This also includes supervisors and upper management. Some staff members have been deemed “essential” and are still working at their desks.

CUIAB judges are still working on-site for the foreseeable future.

FAXs and Emails to the EDD and CUIAB

I have made several attempts to FAX documentation to several EDD auditors and supervisors. The FAXs are returned “No Response.” For the foreseeable future, it’s best to communicate by email or telephone. As far as telephone communications are concerned, it appears to be a one-way street. EDD auditors can call you, but you cannot call them. Most likely this is due to the fact auditors are now working from remote locations and are reluctant to share phone numbers.

EDD Audits and Face-to-Face Audit Conferences

In the beginning of an EDD audit, it is customary to meet face-to-face with your assigned EDD auditor. However, there are situations where no face-to-face meeting takes place. Instead, documentation and other information are sent to the auditor in advance of the audit appointment date. When this occurs, the face-to-face meeting does not take place. Instead, the auditor reviews the advance documentation at the EDD Area Audit Office (AAO). This is a standard procedure known as a ‘desk audit.’ I believe desk audits will be more common under the Covid-19 circumstances. Instead of a face-to-face audit, you should ask the auditor to conduct a desk audit. Send the documentation and information to the auditor. Make sure you send only copies and not originals. Face-to-face audits should be avoided. I foresee the EDD switching to desk audits over face-to-face audits for the foreseeable future.

Document Production in the Current Environment

Things are changing here too. Before Covid-19, it was relatively easy and convenient to assemble relevant audit records. The employer either had them in his/her possession or contacted an accounting firm to reproduce relevant documentation and information. Employers had staff to assist in the gathering process. Now accounting firms are closed and staff has either been terminated or working offsite. It is not going to be as straight-forward these days to produce what the EDD wants to see. This is going to be a two-way street. The EDD is going to have to be patient and grant the employer some slack for compliance.

Information and documentation is going be slower to produce and some of it may not be available until things return to normal. Communication is going to be more important than ever. The employer does not want to give the appearance of hiding the ball or stalling. Therefore, it is important to inform the assigned auditor of difficulties experienced in providing what the auditor expects to receive. While much data and information is online, care must be taken to give the EDD only documentation and information that is relevant to the audit and does not allow the EDD to go on a fishing expedition.

Conclusion

There is an old Chinese proverb: “May you live in interesting times.” Covid-19 has given us these interesting times. Life has changed and we are all restricted at various levels. Those restrictions are going to impact the EDD audit process. There will be difficulties and frustrations at both ends of the audit process. Consternation will be experienced by both the EDD and the employer.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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