Blog Archives - Page 15 of 51

EDD Audit: What It Is, What Triggers It, and How the Process Works

July 12, 2026October 1, 2021 by Brotman Law

The Employment Development Department, or EDD, is one of the largest California state departments and is responsible for administering the payroll tax regulations for California businesses and individuals

An EDD audit is the Employment Development Department’s examination of your California payroll tax compliance — and in practice, it is almost always about one question: whether the people you paid as independent contractors were actually employees. The standard audit covers the 12 most recent completed calendar quarters (three years), reaches every worker you issued a 1099, and tests them against California’s ABC test. If workers get reclassified, the assessment stacks unpaid UI, ETT, SDI, and personal income tax withholding — plus penalties and interest — for all three years. An EDD audit attorney should be involved before your first interview, not after the assessment.

This post covers the audit itself. For what the EDD is and everything it does, see what is the EDD.

By Sam Brotman, JD, LLM, MBA · Last updated July 2026

Key Takeaways

Employment Training Tax provides funds for training employees in specifically targeted industries to make California more competitive in business. It is withheld at a rate of 0.1 percent with a taxable wage limit of $7,000 for 2021.
Personal Income Tax is levied on the income of California residents and income derived from the state by non-residents. The tax rate is determined by the employee’s Withholding Allowance Certificate (W-4 or DE 4). There is no taxable wage limit or maximum tax.
The Employment Development Department (EDD) and Franchise Tax Board (FTB) use these taxes to provide resources for state public services such as schools, public parks, roads, and health and human resources.

How Long Does the IRS Have to Collect on an IRS Balance Due?

July 5, 2026September 24, 2021 by Brotman Law

The IRS cannot chase you forever and, due to the 1998 IRS Reform and Restructuring act, taxpayers have a little relief from the IRS collections division’s pursuit of an IRS balance due.

Key Takeaways

The IRS cannot chase you forever and, due to the 1998 IRS Reform and Restructuring act, taxpayers have a little relief from the IRS collections division’s pursuit of an IRS balance due.
Generally, under IRC § 6502, the IRS will have ten years to collect a liability from the date of assessment. After this ten-year period or statute of limitations has expired, the IRS can no longer try and collect on an IRS balance due.
However, there are several things to note about this ten-year rule.

Generally, under IRC § 6502, the IRS will have ten years to collect a liability from the date of assessment. After this ten-year period or statute of limitations has expired, the IRS can no longer try and collect on an IRS balance due.

However, there are several things to note about this ten-year rule. First and foremost, the statute is carefully crafted to read: ten years from the date of assessment. The assessment date is April 15th of the year that the taxes were due or the date the return was actually filed, whichever occurs later.

This means several things. First, there’s no way to reduce the IRS’s statute of limitations by filing your return before April 15th. Second, there’s a pretty severe penalty for late filing in that the ten-year period does not kick in until you actually file your return. Failing to file a return or attempting to hide from the IRS does not relieve you from liability.

Finally, the assessment date can change if you file an amended return or if the IRS has filed a substitute return on your behalf and you file a return to correct it. In addition, if you tried to conceal income or have filed a fraudulent income tax return, the statute of limitations does not apply on trying to collect on an IRS balance due.

How Do I File my Taxes if I am Getting Divorced?

May 26, 2026September 17, 2021 by Brotman Law

So you have passed the brink of no return in your relationship and decided to file for divorce. Before you do, it’s wise to make some financial preparations ahead of your court date. Getting pictures of assets, copies of bank statements and any retirement accounts is a good start.

Key Takeaways

How Should I File My Taxes During a Divorce?
Pros of Filing Jointly
Cons of Filing Jointly
Who is Responsible for Tax Debt in a Divorce?
Resolving Tax Liability with a Former Spouse

Common Tax Issues for Small Businesses

July 5, 2026September 10, 2021 by Brotman Law

Key Takeaways

Business Ownership and Tax Considerations
Underpayment of Taxes and Poor Record Keeping
Misclassification of the Business and Related Issues
An Ounce of Prevention

Small businesses, of which there are thousands in California, spend the highest percentage of time of any business entity preparing and submitting taxes. Federal, state, and local tax requirements are extremely complex and change every year.

Can Currently Non-Collectible (CNC) Status Stop the FTB?

May 25, 2026September 8, 2021 by Brotman Law

Key Takeaways

The decision to place a taxpayer’s account on CNC is based on an examination of your Collection Information Statement (CIS) that has been completely updated to the time of the examination.
Currently Not Collectible status is meant for severe economic hardship – it is not easily granted.
Periodically, the IRS and FTB will re-evaluate your situation to see if your financial status has changed enough to begin collections again.

Sometimes your financial fortunes take a turn for the worse, and you find yourself owing back taxes to the Franchise Tax Board. You don’t even have two coins to rub together, much less make installment payments, yet you are looking for an alternative to filing for bankruptcy. An Offer in Compromise is also off the table; you just don’t have the money.

How to Request an EDD Installment Agreement

July 5, 2026September 1, 2021 by Brotman Law

There are many individuals – including famous ones – that don’t pay or haven’t paid their taxes in years. Take for instance the late Anthony Bourdain. Before he became a household name with “Kitchen Confidential,” he hadn’t paid his taxes in ten years. He lived with the unrelenting anxiety of the IRS finding out and taking the little money he had to live on.

Key Takeaways

There are many individuals – including famous ones – that don’t pay or haven’t paid their taxes in years. Take for instance the late Anthony Bourdain. Before he became a household name with “Kitchen Confidential,” he hadn’t paid his taxes in ten years.
Until he was 44 year old, Bourdain worked as a chef, lived paycheck to paycheck, and was in some serious debt.
After “Kitchen Confidential” became a hit and the money started to flow, Bourdain said he called up the IRS and his credit card company, paid what he owed and never racked up debt again.

California Payroll Tax: SUI, ETT, SDI & PIT Employer Guide

July 12, 2026August 13, 2021 by Brotman Law

The California payroll tax structure for an employer in this state is based on four distinct taxes, commonly referred to as the CA SUI, ETT, SDI, and PIT payroll taxes. There are different rates for each of these taxes and the calculation methods are different as well.

What Happens During a California Independent Contractor Audit?

May 25, 2026August 4, 2021 by Brotman Law

The auditor’s first goal in an independent contractor audit is establishing a system and a pattern of routine for the business’s operations. For example, if we have a retail store and the retail store has two locations, in each location, we have anywhere between five and seven employees at a time.

Key Takeaways

The auditor’s first goal in an independent contractor audit is establishing a system and a pattern of routine for the business’s operations.
The EDD auditor will use that information to develop a pattern within the business on who the key members of the business are. Essentially, who are the key members of the business and what services do those individuals perform.
The auditor here is establishing a pattern of who the business’s workers are who function as employees. The reason for the auditor doing that obviously is to compare the employees to any independent contractors that the business may have.

State Income Tax Considerations in Multi-State Tax Planning

July 5, 2026July 30, 2021 by Brotman Law

Companies that have employees working in other states must pay close attention to each state’s payroll tax regulations. In many cases, payroll tax will be owed to California and to the other states where your employees are working.

Key Takeaways

State Payroll Taxation and Nexus
Refunds for Tax Paid to Other States
Implications for Service Businesses
Location, Location, Location
Who to Pay?

Payroll taxes are determined on the proportion of income that is generated per state and must be paid to each state.

FBAR Penalty Appeals and Compliance Programs

July 5, 2026July 28, 2021 by Brotman Law

Key Takeaways

Pre-assessment vs. Post-assessment
Litigation
Resolution Programs
Revised Offshore Voluntary Disclosure Program
Completing the Certification Forms

If you cannot come to an agreement to resolve your FBAR issue during the IRS examination stage, you may have a few options. The options available to you will depend on where you are in the penalty process, whether you were found to be in willful violation, and your history of compliance.