The Employment Development Department (EDD) administers payroll taxes in California. Although, just as with income taxes, California payroll tax rates are not as high as federal, the EDD is very active in auditing and collecting payroll taxes.
An EDD audit can be very stressful and often employers have a lot at stake in these situations. Often the issue at hand is worker classification – employee versus independent contractor. The consequences of this determination extend well beyond taxes. For example, if an independent contractor is determined to be an employee, there will be payroll taxes and potential penalties for misclassification of workers. However, this list goes on. An employer could also face additional consequences related to unemployment insurance, benefits, minimum wage, and other human resource concerns. Therefore, EDD audits must be handled with utmost care and attention to detail.
EDD collection matters can also result in significant financial consequences to a business and its owners. As a state agency the EDD has the power to cancel or suspend business licenses when employers fail to comply with their payroll tax responsibilities. This becomes a double-edged sword as it is impossible for an employer to earn the money necessary to pay the liability if they are unable to operate due to license suspension. Therefore it is essential that EDD collection matters are addressed quickly and effectively.
At Hone Maxwell LLP we have the necessary experience to effectively handle EDD audits and collections and collaborate with business owners to ensure that business operations are considered and respected in resolving these matters.