After verifying payroll and payroll tax withholdings, the EDD will next go through and verify all the workers that the business issued 1099s to. This is what is known as the EDD Independent Contractor Test. First, the EDD auditor will go through each 1099 worker in detail, one by one. Even 1099’s that were issued to businesses, landlords and others that are clearly not subject to payroll tax withholdings, you can pretty much count on the EDD auditor going through each one and verifying who was issued a 1099.
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EDD Audit Payroll Tax Verification Test
In addition to the payroll verification test, the EDD will also look at personal income tax withholdings and make sure that the amounts listed match what the state has on file as well. Just to go back and clarify, the EDD audit is going looking at the wages and the income that the people earned. The EDD auditor is going through the payroll journal to make sure that the total wages is going to match. Now, this article discusses going through and doing a personal income tax withholding test.
EDD Audit Payroll Verification Test
Our last article, we discussed the purpose of the EDD audit initial interview questions. Those initial questions just kind of go through some of the background information on the business and help to explain that. After the initial interview, the EDD will conduct what they call a payroll test. The purpose of this article is to explain the payroll test and its function within the EDD audit.
Independent Contractor Audit – Initial Interview Purpose
In our last article, we examined the questions that are asked in an independent contractor audit. In this article, we would like to examine the purpose behind those questions in a little more depth.
EDD Independent Contractor Audit – Initial Compliance Interview
The first thing that happens in an EDD independent contractor audit is the initial compliance interview. The initial compliance interview serves a couple of different purposes. Number one, it is to get background information on the client. Number two, it is to get answers in place for different questions in case there is any problems or factual disputes that come up later. For example, one of the questions they ask you is “How many locations do you have?”. That way if they later get information on a location that you did not disclose, you could potentially dig yourself into trouble.
California Payroll Tax Audits and the General Ledger
During a payroll tax audit, the EDD is next going to go through the business’s general ledger in detail, the general ledger is important because the general ledger contains a record of all the payments the business made during the audit period in question. When the auditor goes through the general ledger, they are going to be looking for a couple of different things. Number one, is they’re going to be looking for payments to people. The auditor is looking for payments to people who may or may not have been a 1099 and they are going to be looking for payments to the business’s employees and toward 1099 contractors that were not listed on the W2 or the 1099 for whatever reason.
Sales Tax Mistakes to Be Aware of and How to Avoid Them
As a retailer or other seller of products, you have a lot of details to attend to but one of the most important, often most complex, is your sales and use tax obligations. Sometimes determining sales tax is like peeling an onion; just when you think you have found all the nuances, there is another layer to contend with.
Non-payment of sales and use tax comes with stiff fines, potential jail time, and repayment requirements. Avoiding all that is essential to both your business and your well-being.
What to Do If You Miss the Tax Filing Deadline
Uh oh. It is now after April 18th, and you did not file your taxes. What do you do?
If you are expecting a refund, you don’t sweat it because you do not get penalized for not filing in this case. You won’t get your refund until you do file, but otherwise, the IRS is not going to come after you for your paperwork. (If you wait until after April 18, 2020, though, the IRS keeps your refund, so you better get on it.)
What Sales Are Subject to Sales Tax?
Nearly all states in the U.S. charge sales tax on items sold, California is no different in that regard. Sales taxes go into the general fund to help pay for education, health care, public pensions, and other programs. Sales taxes can also be collected for special programs or specific areas of the state.
Common Tax Filing Mistakes and How to Avoid Them
It is time once again for that annual rite of passage for every taxpayer: getting the tax return and payment to the IRS on time.
If you have already filed and paid your taxes, you are to be congratulated. Hopefully, you have not made mistakes or, if you have, then your early filing may give you a cushion for correcting them before the tax deadline.