Receiving an EDD audit notice can be a scary thing. The reason why you need to take it so seriously is because there’s a potential personal liability. When you go through an EDD audit, the EDD is generally looking to reclassify workers. You have paid somebody as an independent contractor. You believe they’re an independent contractor, and you believe you have no control, you believe they do the work without the supervision … You believe all these things. It’s our job to prove that they are in fact an independent contractor.
With the way the laws have been changing over the past three years, there are many factors that need to be considered. When you get an audit, it is important to determine what your next steps are. Do you want to continue fighting with the EDD? Do you want to continue going up the chain of command? Or are you ready to concede? Are you ready to just pay the bill and move on?
It’s important to understand both sides of the coin because the EDD could potentially come back after you as an owner or officer of the company. They want to make sure that the taxes that were withheld, or should have been withheld, are going to be paid over to the government. It’s a really important area and it’s important that business owners learn to take these audit notices very seriously.