Unwanted attention.

• Position: Auditing guidance

business might be audited for several reasons, from random causes to someone turning them in to the Employment Development Department.

When being audited by the EDD the norntal process is to begin with the last three years ending with the latest closed calendar quarter. If the business has not been filing payroll returns reporting any employees, then the EDD can go back eight years.

the following discusses some of the main reasons a business might. be audited by the EDD.

Obstructed Claims Audit

The majority of EDD audits relate to a worker who was paid as an independent contractor and then files for either unemployment insurance or disability insurance benefits. This is called an "obstructedstru claim" audit. After the EDD interviewer gets some information. the claim is turned over to the EDD's Field Audit and Comipliance Division ho determine if the worker should have been reported as employee. The EDD then has 10 (days to dletermine if the worker is entitled to benefits.

Given the short time period, the worker is likely to receive the benefits and the EDD would then audit the business.

Underground Economy

California agencies are working together to find underground economy businesses that are not paving their taxes. California law has set up die Employment Enforcement Task Force, Construction Enforcement Task Force. Construction Enforcement Project and joint Enforcement Strike Force.

Each of these groups work different areas of the underground economy as they hunt for businesses that are not reporting and paying taxes. or being incorrectly licensed. Each group consists of representatives of several agencies including:

* EDD;

* Franchise Tax Board: Board of Equalization:

* Department of Industrial Relations; Contractors Slate License Board:

* Department of Consumer Affairs:

* Department of Insurance: and

* Department of Justice.

For more information about these groups, see the EDD information sheet DE63I (www.cahpa.org/DE631) and visit the EDD underground economy webpage (www. calcpa. org/undergroundecon )

Department of Labor

Much of the funding for the FDD comes from the DOL, which requires the EDD to do a full payroll audit on some employers. The EDD will he looking at such things as correct computation of gross and deductions on the paychecks, whether payroll tax returns are being filed and on time, whether deposits are being made in the correct amounts and on lime, and more.

The DOL wants the EDD to do audits of all types on 1 percent...