California business owners!
A storm is brewing, and you need to be prepared.
I just heard about the news that will make you squirm.
For years, I have told my clients when it comes to audits. The IRS is not as bad as the State of California agencies.
One of those agencies, the Employment Development Department (EDD), just made the news that will scare any business owner.
I remember just a few years ago, one of my real estate brokers’ clients went through an EDD audit, and it was hell and very invasive.
The Employment Development Department (EDD) in California has officially launched aggressive audits targeting businesses that sent 1099 forms to workers who later filed for unemployment benefits.
Here’s what you need to know about these audits:
- Consequences: Misclassifying workers can result in severe penalties, including back taxes, fines, and potential lawsuits from workers seeking employee benefits.
- Protect Your Business: Take immediate action to safeguard your business from potential audits:
- Review Worker Classification: Ensure your workers are correctly classified as independent contractors or employees.
- Document Independent Contractor Agreements: Have written agreements that outline the contractor’s responsibilities, deliverables, and payment terms.
- Maintain Evidence of Independence: Keep records such as contracts, invoices, liability insurance, and proof of multiple clients.
- Implement Robust Record-Keeping: Maintain accurate records of payments, hours worked, and communications with contractors.
- Stay Informed: Stay updated on employment laws to ensure compliance and mitigate risks.
- Seek Legal Guidance: Consult legal professionals to assess your worker classifications and ensure compliance with California’s laws.
- If you get an audit notice from EDD, call us immediately to get started in the right direction to protect yourself.
Be proactive and protect your business from unnecessary turmoil. Stay compliant, review your classifications, document agreements, maintain records, and seek legal advice when needed.
Remember, the EDD is on high alert, and prevention is key.
Stay vigilant!
Carlos Samaniego EA
