Ask The California Employment Tax And Payroll Tax Attorney – How Can I Get A Different EDD Auditor?

 

By Robert S. Schriebman

2023

 Introduction

Let’s face it, tax audits are stressful. I do not know of any employer who wishes this process upon himself. Having said this, once the audit process commences it can be quite a roller coaster experience with your assigned auditor making demands for documentation and information and asking for contact information for 1099 recipients, as well as those not receiving 1099s. All of this can be very intimidating.

It is a common reaction and goal for the employer to make a good impression and harbor secret wishes that whatever is said or presented to the auditor will result in the EDD going away or issuing a no change examination. Sometimes this happens, but don’t count on it.

The sad reality is that most likely what is disclosed to the auditor will not be found favorable to the employer and the end result is the employer being on the receiving end of a Notice of Assessment.

It is also a sad reality that many employers elect to “DIY” and not retain experienced professional representation. What usually happens when one goes it alone is a disaster because the employer, again wishing to make a good impression and be super cooperative provides the EDD auditor with information and document that an experienced professional withholds as a matter of course. The mass documentation allows the auditor to undertake an extensive fishing expedition by scrutinizing bank statements and credit card statements that eventually result in a large increase of taxable compensation to the employer. This is especially true in LLC and S Corporation examinations.

Common Problems Employers Face During an EDD Audit.

 There can be many reasons why the relationship between the employer and the auditor is not exactly like a day at the beach. A male employer may not want a female auditor, or a female employer may not want a male auditor. The auditor may have a thick accent and be hard to understand. Emails from the auditor may be intimidating. Let’s face it, there are auditors who are bullies with a badge. You may perceive the auditor to be super aggressive or have it in for you. It seems that whatever you give the auditor is not enough; the auditor wants more. A professional representative may have an auditor who violates the Power of Attorney by directly communicating with the employer and appearing to put the professional in a bad light vis-à-vis the client. The auditor seems to be on a fishing expedition and sends many emails requesting elaboration and more information. You may object to the auditor contacting and interviewing your workers, or 1099 recipients. The auditor may demand that you provide federal tax documents, such as IRS payroll tax returns as well as IRS income tax returns. No matter how hard you try to explain the relationship with an outside worker, your explanation falls on deaf ears.

It is also common to perceive that the auditor has made up his/her mind against you from the very beginning no matter what you say or what you do. EDD Publication DE 195 is the Employers’ Bill of Rights. It guarantees “You have the right to an impartial audit and a full explanation of the audit findings.” Sadly, very few EDD audits measure up to this standard.

I Don’t Like My EDD Auditor, What Can I Do?

It is very difficult to change auditors once the audit has started. You have to have a very good reason and even that may not get you where you want to go. EDD management is very protective of its staff. Management is there to tell you who is in control of the audit process. Some managers are bureaucrats; they don’t work for you, and they want to show who’s the boss. Some managers are intimidated by their own audit staff and do not wish to generate internal strife. In a nutshell, it’s an uphill battle.

Follow The Chain of Command

Assuming you have a valid reason to complain about the conduct of your audit, you must follow the chain of command when requesting a change of auditor. The first place to is with the auditor’s immediate supervisor or manager. If your request gets turned down, your next level is the Audit Office Manager.

Contact the EDD Taxpayer Advocate

The Advocate is there for you. The Advocate is a liaison between the employer and all levels within the EDD. Services are provided at no charge. The Advocate has a staff who will look into the problem. If a staffer cannot resolve the matter, the Advocate lone may come to bat for you. Having said this, you must have clear and objective issues to bring before the advocate. You must point out specific and major errors or problems in dealing with the specific auditor. The Advocate has broad powers and will contact upper management on a one-to-one basis to investigate your complaint and try to arrive at a mutually satisfactory solution. Bringing in the Advocate, however, is no guarantee of success. For example, if management refuses to change auditors, there is little the Advocate can do for you.

Other Ways of Winning the Audit

The word “winning” has many meanings. When it comes to an EDD audit, it rarely means total victory. A good result may finally be achieved through a favorable settlement process or a win before an administrative law judge. Either way, the auditor is out of your life.

Conclusion

Years ago, singer Stephen Sills had a hit entitled, “Love the One You’re With.” There is much wisdom in his lyrics. The chances are against your ability to change EDD auditors. It may be time for an attitude correction on your part. Remember that you can catch more flies with honey than you can with vinegar. Do not count on the EDD, at any level, to see your worldview of the audit process. You may be stuck with the auditor. In that case remember to love the one you are with, conclude the audit process and move onto a post-audit resolution.

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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 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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