What Happens if I Receive an Inquiry of Record Notice?

*The following article was updated in January 2025*

One of the most common audit calls I receive is from businesses who get an inquiry of record notice, or a pre-audit questionnaire. The EDD is going to audit you for three years. What they want to do is they’re looking for the independent contractors that you have paid, and they are looking to reclassify them as employees. In the state of California, I always tell my clients, we assume all workers are employees. Start with the assumption that these are employees, unless we can prove otherwise. This is the best way to protect yourself going forward. When we’re in an EDD on it, we have the burden of proof. We must show the EDD why these individuals that we paid money are, in fact, independent contractors. There are many different thresholds that need to be met. But it’s important to understand that we have to provide that information to the EDD.

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Allison Soares

Allison Soares, a renowned tax attorney, excels in representing clients before the IRS, FTB, EDD, and CDTFA. With a Bachelor of Arts in Finance from the University of Wisconsin, Milwaukee, and a transformative teaching stint in Brazil, Allison’s diverse background enriches her legal expertise. She pursued law at St. Thomas University School of Law, Miami, complementing it with an MBA in accounting and forensic accounting. Further honing her skills, she obtained a Master of Laws in Taxation from the University of San Diego School of Law. As an adjunct professor at San Diego State University, Allison imparts her knowledge in tax procedures, practice, and ethics. Her accolades include being named Best of the Bar by the San Diego Business Journal and multiple Super Lawyer recognitions. Committed to community service, she volunteers with Forever Balboa Park and Friends of Balboa Park. Allison’s authoritative contributions in tax law are showcased through her publications and speaking engagements.

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