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Independent Contractor Reclassification Audit

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The Employment Development Department in California has been particularly aggressive in the area of independent contractor reclassification audits. In the eyes of the Employment Development Department, California businesses have been abusing the system by treating workers who should be classified as employees as independent contractors. In doing so they shift the burden for payroll taxes onto the worker and avoid their own contributions to the payroll tax and unemployment insurance system. As a result, the Employment Development Department has been particularly vigilant in auditing businesses for perceived abused of the system. Often these independent contractor reclassification audits can be costly for businesses.

Key Takeaways

  • The Employment Development Department in California has been particularly aggressive in the area of independent contractor reclassification audits.
  • Employment Development Department independent contractor reclassification audits are potentially costly for businesses.
  • Many businesses make serious mistakes during an independent contractor reclassification audits. First, they assume that having an independent contractor agreement will protect them in the audit. This categorically false.

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How to Prevent Corporate Fraud

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This is the fourth part in my series discussing corporate fraud. For more on this topic please read

Key Takeaways

  • This is the fourth part in my series discussing corporate fraud.
  • Ultimately, all institutions should have a comprehensive fraud prevention program tailored to meet the needs of the organization. Fraud prevention programs should also include three prongs to make them healthy enough to deter fraud.
  • Whistleblower protections and training programs are another way to accomplish this task. Setting up a successful hotline and encouraging employees to speak out when they see or think they have discovered tool can serve as a valuable deterrent.

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Types of Fraud

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However, financial statement manipulation is simply on the edge of the fraud landscape. Much more common are asset misappropriations. The three basic types of asset misappropriations are skimming, larceny and fraudulent disbursements. Skimming and larceny occur when cash is taken directly from the employer, the difference between the two being that skimming occurs before the cash has a chance to be reported. Fraudulent disbursements are a way of scamming the corporation into giving the fraudster payments. Fraudulent disbursements are one of the more popular method of fraud and are implemented in a number of different ways. False billing and payroll schemes are the most common according to the text. Shell companies or ghost employees are often used to make the organization distribute payment with minimal expose outside of the immediate system. In more some of the more complicated cases, corruption in all forms is prevalent. Bid rigging, kickbacks and bribes are all forms that corruption can flourish in the corporate environment. The best way to combat this is through a combination of increased security measures working in conjunction with one another to best prevent organization fraud. While the two organizations should have some overlap and maybe some shared responsibility, one is not a substitute for the other. Both are critical to maintaining the proper level of internal controls necessary to prevent fraud

Key Takeaways

  • However, financial statement manipulation is simply on the edge of the fraud landscape. Much more common are asset misappropriations. The three basic types of asset misappropriations are skimming, larceny and fraudulent disbursements.
  • External fraud is also an increasing threat to corporate security and stability. External fraud can include pyramid or ponzi schemes, credit card fraud, and information or security fraud.
  • In addition to credit card fraud, information security is becoming more prevalent as well. Many businesses do not have efficiently run IT security or have strong policies implemented to deter both internal and external attacked.

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Government Response to Corporate Fraud

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I next want to discuss the history of the governmental response and the more noteworthy commentary on corporate culture in the last thirty years. Although measures to prevent corporate crime were in effect before the 1980s, one of the more sufficient events was the formation of COSO in 1985. COSO is the Committee of Sponsoring Organizations, a volunteer group formed by the major accounting, finance, and other professional organizations. The committee reviewed instances of fraud and made key recommendations to improve reporting and internal controls. Among these were having an audit committee composed entirely of independent directors, developing a written code of ethics, and recommending that the SEC have new power to bar or suspend those involved in fraudulent financial statement reporting. In addition, COSO established a framework for an effective internal control program, which has become the standard framework for many companies in the United States. The authors next detail the Sarbanes-Oxley Act of 2002, which created the Public Company Accounting Oversight Board and established other procedures and safeguards. Sarbanes-Oxley vastly increased the requirements and protocols for publicly traded companies, as well as creating new laws in the areas of securities fraud, white-collar crime, and whistleblower protection.

Key Takeaways

  • I next want to discuss the history of the governmental response and the more noteworthy commentary on corporate culture in the last thirty years.
  • After an overview of public and governmental response to fraud, I want to next discuss the subject of internal controls. A successful antifraud program should contain several key elements.
  • There are many different types of fraud, many of which are prevalent in the workplace. First there is financial statement fraud, which can be deadly to a company both financially and reputationally.

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On Corporate Fraud

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Corporate fraud has always been one of the scourges of civilized society, although in the past decade we have witnessed unprecedented levels of greed in corporate culture. The past decade has been marred by Enron, WorldCom, Adelphia and many others, as fraud shrinks our economy by approximately six percent. Watchful eyes cannot be everywhere at all times, but often the problem is that the individuals responsible for oversight lapse on their duty of independence. In response, wide scale reform has been passed into law as the government tries to combat the problem on all fronts. However, even the most stringent reforms, reporting requirements, and penalties do not deter all fraudulent behavior within the corporate environment. I want this series of articles to serve as reference point for a variety of individuals, since fraud is a serious concern whose aftershocks can be felt well outside of the company. Thoroughly understanding and utilizing the methods contained in this book will help combat the challenges we now face today in the work place.

Key Takeaways

  • Corporate fraud has always been one of the scourges of civilized society, although in the past decade we have witnessed unprecedented levels of greed in corporate culture.
  • Fraud can be defined with the concept of the rogue employee. This person is any employee of the corporation who goes beyond the duties they were hired for conspires and executes attacks.
  • Before tackling the internal controls needed to prevent fraud in the workplace, I wanted to tackle the underlying motivations for what makes a person commit this type of behavior. To help explain the underpinnings of the problem, I want to cite the work of Dr.

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California Bank Levy Release

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California Bank Levy Release

california bank levy release

Key Takeaways

  • One important thing to note is that a levy on the assets in your bank account is one method that the California Franchise Tax Board has as a means of ensuring taxpayer compliance.
  • Typically, there is a twenty-one day holding period associated with a Franchise Tax Board levy so that the taxpayer has time to enter into a payment arrangement or seek a California bank levy release.
  • California bank levy releases are best obtained by calling the Franchise Tax Board and working to immediately resolve the liability.

When a California taxpayer fails to make proper tax payments, the Franchise Tax Board can take a number of actions against them.

One of these measures includes initiating a California bank levy against the taxpayer, which is a seizure of their assets in their bank account. The only way to prevent this is to obtain a California bank levy release.

One important thing to note is that a levy on the assets in your bank account is one method that the California Franchise Tax Board has as a means of ensuring taxpayer compliance. However, in cases where the Franchise Tax Board initiates a California bank levy, it is important to be aware of the proper tax procedure that is involved and what steps must be taken before funds are appropriated by the Franchise Tax Board.

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Franchise Tax Board Attorney Hiring Criteria

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Click here to read the previous section about hiring a Franchise Tax Board Lawyer.

Key Takeaways

  • In my last article, I talked about rapport and how important it was in making the decision to hire a Franchise Tax Board attorney.
  • Second to rapport, experience is one of the main factors that I feel separates franchise tax board attorneys from one another.
  • One of the greatest ways to evaluate an attorney is through what other people have said about the person. With the advent of the internet, information on professional service providers is often readily available and can readily be accessed.

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Franchise Tax Board Lawyer Hiring Criteria

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First, I want to state that I don’t believe everyone needs a franchise tax board lawyer to handles their California state tax issues. One of the main reasons that I started blogging was to help people. I wanted to motivate “self-help” style legal solutions by taking the knowledge that I had an as an attorney and making it available on the web. Indeed, if you take the time to read much of what I have written on the blog, you can almost become as knowledgeable as I am on many of these same subjects (although I have an experience edge dealing with this stuff in practice).

Key Takeaways

  • First, I want to state that I don’t believe everyone needs a franchise tax board lawyer to handles their California state tax issues. One of the main reasons that I started blogging was to help people.
  • However, I am cognizant of the fact that there are some situations where it is beneficial to hire a franchise tax board lawyer to handle your California state tax issues.
  • When asked what I believe the number one hiring criteria for selecting a lawyer, even more than a person’s experience, education, or pedigree, I believe it is the rapport that the client has with the lawyer.

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Tips for Franchise Tax Board Audits

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In my previous article on the Franchise Tax Board audit, I talked about the importance of pre-auditing the tax return in question in order to identify any issues before your first meeting with the Franchise Tax Board auditor. In this article, I will discuss another advantage of pre-auditing a return, the importance of the presentation of records in general, and the importance of your relationship with the auditor in order to gain successful outcomes in Franchise Tax Board audits.

Key Takeaways

  • Pre-auditing the return also has the added advantage of getting all your books and records organized and ready for the auditor prior to the audit. Appearances are very important in Franchise Tax Board audits as it helps to set the tone of an audit.
  • Speaking of good relationships, it is always important to keep the golden rule of Franchise Tax Board audits in mind: you win always win more flies with honey than with vinegar during the course of an audit.
  • I hope this series of articles has been helpful in providing you with some perspective on Franchise Tax Board audits. If you have any questions or if I can further assist you, please contact me directly via the information contained on this website.

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Franchise Tax Board Audit Tips

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Throughout my years of practice, I have developed a few helpful tips for dealing with a Franchise Tax Board audit and auditors from the state of California. Franchise Tax Board audits are not nearly as common these days. Most of my clients who receive contact from the Franchise Tax Board are contacted after they are subject to an IRS audit and merely sent a bill based on the adjustment in taxable income that the IRS has already calculated. In other words, they let the IRS do all the hard work and send a supplemental bill later on. However, I hope that these few helpful tips will guide you in your dealings with the Franchise Tax Board. For more information on California state tax matters, please visit the Franchise Tax Board attorney services section of my website.

Key Takeaways

  • Throughout my years of practice, I have developed a few helpful tips for dealing with a Franchise Tax Board audit and auditors from the state of California. Franchise Tax Board audits are not nearly as common these days.
  • Keep in mind that the purpose of a Franchise Tax Board audit is to “effectively and efficiently determine the correct amount of tax based on an analysis of relevant tax statutes, regulations, and case law as applied to the taxpayer’s facts”.
  • Next, it is important to control the flow of information and how that information is communicated to the Franchise Tax Board.

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Brotman Law Featured in Inc. Magazine - Fastest Growing Law Firm in California