What Documents Should I Have Ready for an EDD Audit?

If you’re a California business owner, you may find yourself facing an EDD audit at some point. If you’re not familiar with the term, an EDD audit occurs when the California Employment Development Department (EDD) launches an investigation into a business’ state payroll tax records. Generally, the EDD is trying to determine if the business has classified a worker as an independent contractor instead of an employee. If the EDD determines the worker is an employee, it can personally assess the business owner for “unpaid” payroll taxes. 

The first step in an audit is the investigatory process, which starts when you receive what’s known as an Inquiry Regarding Records notice from the EDD. Within that notice is a list of documents the EDD is requesting that you provide for the audit. Let’s look at those records and documents you should have ready for an EDD audit.

Preaudit Questionnaire — Within the notice you receive from the EDD is the 2-page Preaudit Questionnaire. This is the first document you need to complete for an EDD audit. You have 14 calendar days from the date in which it was mailed to you to return the questionnaire to the EDD. It is crucial that you not ignore this document as this is what your EDD auditor uses to begin your audit.

W-2 and 1099 Forms — Be sure to have copies of all your employee W-2 Forms and 1099 Forms for all your independent contractors. You should also have any payroll documentation and pay stubs for employees and yourself as the business owner. 

General Employment Questionnaires — These include any questionnaires, applications for employment, hiring documents, and evaluation forms that employees completed. 

Employee Registers — An employee register is essentially the employee file, where you store all important information about your employees. This includes their name, address, telephone numbers, job title, qualifications, absences, documents, notes and other details.

Wage Information — Any documentation you have about what employees or independent contractors were paid with respect to wages and benefits. Be sure to include all the wages for the particular time frames the EDD is questioning with the audit.

Previous tax returns — Be sure to have copies of your previous federal and state tax returns in the years the EDD is questioning. 

Bank Statements — This includes both business checking and savings statements for the months and years in question. 

These are generally the documents the EDD may request from you. And they may request some, and not others. After these documents are requested, the actual audit begins and the EDD may ask for other additional documents. 

Small business owners and taxpayers have a lot on the line financially, so don’t assume you have to handle this burden on your own. The most important thing to remember is to always work with an experienced tax attorney who can review your documents and make sure you’re submitting everything that’s been requested. 

Allison Soares is a partner and tax attorney at Vanst Law LLP. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits from San Francisco to San Diego. 

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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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