A California payroll tax attorney defends employers when payroll taxes become a legal problem — EDD assessments, worker-classification audits, unpaid federal 941 deposits, and the personal-liability assessments both the state and the IRS use to collect a business’s payroll debt from its owners and officers.
The EDD audit statistics page collects the enforcement data behind these cases.
Payroll tax is the one tax where the government’s position is that the money was never yours — you withheld it from employees and held it in trust. That framing is why payroll cases escalate faster than income tax cases, why they pierce entities, and why they are the most common tax matter to turn personal. We defend these cases on both the state and federal side, and the first thing we do is tell you which side your real exposure is on.
What California employers actually pay in 2026
Four taxes run through every California payroll. Employers pay Unemployment Insurance (Schedule F+ rates of 1.5%–6.2% on the first $7,000 per employee; new employers start at 3.4%) and the Employment Training Tax (0.1%). Employees fund State Disability Insurance — 1.3% in 2026 with no wage cap since 2024 — and Personal Income Tax withholding, both of which the employer must withhold and remit. When the EDD assesses a misclassification case, it stacks all four, plus penalties and interest, across every quarter in the audit window. The payroll tax overview breaks down the mechanics and current figures.
Can the EDD or IRS come after you personally?
Yes — this is the defining feature of payroll tax exposure, and the reason to treat it differently from every other business debt.
On the state side, Unemployment Insurance Code § 1735 lets the EDD assess any responsible person — officer, owner, or anyone with authority over which bills get paid — personally for the corporation’s unpaid payroll taxes, once the business can’t or won’t pay. On the federal side, IRC § 6672 does the same thing through the Trust Fund Recovery Penalty: 100% of the withheld-but-unremitted taxes, assessed against you individually.
Both statutes require responsibility and willfulness, and both elements are defensible. Who actually controlled the checkbook? What did you know, and when? Was there a period where you paid other creditors while taxes went unpaid? These cases are won or lost on facts and timelines, which is why the worst thing a responsible-person target can do is give the interviewing agent an unprepared narrative.
EDD audits and worker classification
The most common road into a payroll tax assessment is an EDD audit over independent-contractor classification, tested under the ABC framework. The standard audit covers twelve quarters — three years — and can reach eight years where returns were never filed. One former contractor filing an unemployment claim is the classic trigger.
To be clear about which page you need: if you are holding an audit notice, start with our EDD audit attorney page and the audit process chapter — that is the audit playbook. This page is about the payroll tax problem in all its forms: the assessment after the audit, the deposits that didn’t get made, the personal-liability case, and the resolution options.
When you can’t pay: what resolution actually looks like
The short version is that both agencies would rather collect something on a schedule than force a shutdown, but neither will volunteer the options. On the state side: installment agreements, penalty relief where reasonable cause exists, and settlement in appropriate cases. On the federal side: installment agreements, currently-not-collectible status, and offers in compromise — with the caveat that trust-fund balances get less flexibility than income tax debt. Sequencing matters: resolving the corporate balance in the right order can limit or moot the personal assessment.
When it stops being a money problem
Willful failure to collect or pay over payroll taxes is a felony under IRC § 7202, and California prosecutes payroll fraud through the EDD’s investigation division. The practical markers: payroll taxes unpaid across many quarters while the business paid other creditors, false returns, or cash payroll. If any of that describes the file, the case needs criminal tax counsel before anyone talks to an agent — the transition from civil to criminal usually happens quietly.
What we charge
Fees are quoted upfront. Depending on the matter we work hourly or flat-fee, and if the balance is small enough that professional fees don’t pencil, we’ll say so and point you at the self-help route. Most payroll tax defense engagements land between $2,500 and $20,000 depending on stage and exposure. The cost guide publishes real ranges; pricing explains structure. The first 15-minute call is free; attorney consultations are paid and quoted before you book.
The record: $100M+ in tax penalties and interest eliminated. 400+ audit representations. Payroll cases handled on both the EDD and IRS side, through assessment, appeal, and resolution.
Tell us about your payroll tax matter
A short note is enough — we respond to new inquiries within one business day.
California payroll tax attorney FAQ
Am I personally liable for my company’s unpaid payroll taxes?
You can be. CUIC § 1735 (state) and the IRC § 6672 Trust Fund Recovery Penalty (federal) both allow personal assessment of responsible persons who willfully failed to pay. Both elements — responsibility and willfulness — are fact questions, and both are defensible with the right timeline.
What’s the difference between an EDD audit and a payroll tax problem?
The audit is the examination — usually worker classification, tested over twelve quarters. The payroll tax problem is everything that follows or exists without one: assessments, unpaid deposits, personal-liability determinations, and collections. Audit in hand, start with our EDD audit page; balance in hand, you’re in the right place.
Can payroll tax debt be settled or put on a payment plan?
Yes. The EDD offers installment agreements and, in appropriate cases, settlement; the IRS offers installment agreements, currently-not-collectible status, and offers in compromise — though trust-fund balances get less flexibility. Sequencing the corporate and personal balances correctly is where most of the leverage lives.
When does unpaid payroll tax become criminal?
Willful failure to collect or pay over is a felony under IRC § 7202, and California prosecutes payroll fraud through EDD investigations. Long runs of unpaid quarters while other creditors got paid, false returns, or cash payroll are the markers that move a file from civil to criminal.
Where to go deeper
The California payroll tax overview covers rates and mechanics, payroll vs. income tax explains why these cases differ, the EDD audit chapter walks the examination itself, and our California EDD defense hub covers the agency end to end.
If the EDD or IRS is asking about your payroll taxes, book a free 15-minute call or call (619) 378-3138. We’ll tell you where the real exposure is, and what it costs to handle, before you spend anything.