ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – FREQUENTLY ASKED QUESTIONS – ALL ABOUT EDD AUDITS – PART 4
By Robert S. Schriebman
During the COVID-19 pandemic the EDD conducted very few if any audits. Auditors were reassigned primarily to handle the unprecedented number of unemployment benefit claims. The auditors worked from remote locations. In early 2021 the audit program resumed. I have received many calls from employers who find themselves under examination. 2020 was a tough year for them. They have many common questions and concerns. In this series of FAQs, I will attempt to provide answers to their questions and address their concerns. If you find yourself in this situation, you are welcome to call my office and speak with an experienced professional.
The following FAQs are real. They are not academic. They have been asked by callers and clients over the years. I have learned that there is no such thing as a stupid question. I pass these onto you.
Should I complete the Pre-Audit Questionnaire on my own without seeking professional advice?
The Pre-Audit Questionnaire is a form that accompanies the initial audit notice entitled “Inquiry Concerning Records.” It is a two-page form that appears innocuous at first glance. Buried in the Questionnaire are probes to determine if you engaged independent contractors and the services they performed. If your response is in the affirmative, the auditor will proceed with the audit. There are also questions designed to identify potentially responsible persons for a future CUIC § 1735 assessment. There are also questions seeking to determine the location of your bank account and your account number. Therefore, I recommend that you at least consult with an experienced professional who will guide you through the form.
You do not believe you should be audited and you have valid reasons why you engage independent contractors. Should you call the auditor and attempt to talk the auditor out of the audit?
When you receive the initial audit documents, and specifically “Inquiry Concerning Records,” the person signing the form may just be an appointment clerk and not your assigned auditor. That person does not have the training or skill level to evaluate what you have to say. I have found it futile to attempt to talk an auditor out of an audit unless a specific statute exempts workers. Trying to convince an auditor to drop your matter is a waste of time and can even harm you. Anything that you say can and will be construed against you and in favor of the EDD. Calling the EDD and presenting your argument early on is something that should be avoided at all costs.
I spoke with my assigned auditor and got a bad feeling. Can I request a different auditor?
No. The assigned auditor is in charge of the examination. Any complaint to management, will be disregarded no matter how nice the supervisor is or appears sympathetic to your position. As the old rock and roll song went, “You have to love the one you’re with.”
If I am already working with an EDD auditor, is it too late to get representation?
Absolutely not! You are entitled to seek professional advice or professional representation at any stage of the audit. The Employers’ Bill of Rights, EDD Publication DE 195 states the following:
“You have the right to have someone, such as an attorney, enrolled agent, or accountant, present during the audit or to represent you in your absence.”
Timing is the key when contacting a professional representative. The earlier the better. If you wait until you start giving the auditor information and documents, you may have given the auditor damaging information which they are not legally entitled to receive.
Should I call the assigned auditor to introduce myself and to tell the auditor I am seeking representation?
The EDD audit notice demands that you contact the EDD within 14 days of receipt. This intimidates many people. They feel pressured. The 14-day so called deadline is very flexible. The EDD will give you as much additional time as you need to prepare for the audit or to consider hiring a professional. I recommend that you call the EDD and simply tell them that you need more time to seek representation. They should give it to you.
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 50 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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