California State Tax Archives - Page 3 of 10

California Payroll Tax Audits and Employee Reimbursements

April 23, 2026January 4, 2018 by Brotman Law

Key Takeaways

Topic: California Payroll Tax Audits and Employee Reimbursements
One of the biggest problems that we come across in payroll audits is employee reimbursements and independent contractor reimbursements.
A lot of the times what will happen is an employee will get paid a normal paycheck and then they will spend their own money outside the context of the business to buy materials,….

One of the biggest problems that we come across in payroll audits is employee reimbursements and independent contractor reimbursements. A lot of the times what will happen is an employee will get paid a normal paycheck and then they will spend their own money outside the context of the business to buy materials, to buy supplies, go post office do whatever. The business will write the employee a check out of their operating account and not run it through payroll.

EDD Independent Contractor Test

April 23, 2026January 3, 2018 by Brotman Law

Key Takeaways

Topic: EDD Independent Contractor Test
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.

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.

Sales Tax Mistakes to Be Aware of and How to Avoid Them

April 23, 2026May 3, 2017 by Brotman Law

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Key Takeaways

Let’s start with this one because it is not something sellers commonly see.
Whether or not a buyer is allowed tax-free status is up to you to find out. You must make certain the buyer has a legal exemption; otherwise, you could be found liable for uncollected sales tax (see jail time above).
Did you know there are over 11,000 sales tax jurisdictions in the US? Not only that, but changes occur annually.

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.

Your Rights as a Taxpayer with the Board of Equalization

April 23, 2026March 29, 2017 by Brotman Law

The Board of Equalization (BOE) administers the tax program for both business and property taxes for the State of California. Business taxes include:

Sales and use tax
Fuel tax
Cigarette tax
Alcoholic beverage tax

Business taxpayers may take up their concerns directly with the main office of the BOE while property tax concerns are addressed by the local county office.

When you deal with the tax agencies of California, you may feel like you do not have any rights. These agencies can be aggressive and overwhelming to most individuals unused to dealing with them.

How to File an Appeal with the California Board of Equalization

April 23, 2026February 1, 2017 by Brotman Law

Key Takeaways

The Board of Equalization reviews your position. At this time it may ask for additional records or documentation to support your position.
If you have not already requested an appeals conference or have missed the deadline for responding to the Board’s conclusions, a Notice of Redetermination will be issued to you with the staff’s conclusion.
If you are continuing with the appeals process, you will receive a Verification of Appeals Conference Form, which must be completed and returned within 15 days.

The California Board of Equalization has audited you and found potential underpayment of taxes, fees, or additional amounts the BOE determines you owe.

Your next step is to meet with the BOE supervisor and then the District Principal Auditor. If you do not convince them that the results are in error, you can file an appeal.

What to Do if the EDD Takes Your Money

April 23, 2026January 25, 2017 by Brotman Law

Key Takeaways

The EDD is within its legal rights to withhold money from a variety of programs and tax refunds if you do not pay up.
Any contact by the EDD or Central Collection Division will be made by phone or postal mail.
The EDD much prefers to work out a solution to the problem without resorting to enforced collection methods.

The California Employment Development Department can legally withhold money owed to you by the state for repayment of debt. In other words, either through error or willful action, you owe a monetary debt to the State of California.

The EDD is within its legal rights to withhold money from a variety of programs and tax refunds if you do not pay up. It works with the California Franchise Tax Board, the State Lottery, and the State Controller to collect the outstanding debt.

What is a Sales Tax Nexus and How Does It Affect My Business?

April 23, 2026January 18, 2017 by Brotman Law

Key Takeaways

A state may create legislation requiring a seller with nexus in that state to pay tax on sales of tangible property within the state.
The State of California specifies exactly what “engaged in business” means on the state and local level.
Nexus has been around in some form since taxes were invented but the need for retailers from outside the state to collect and remit sales tax expanded each time a new selling innovation came along.

A state may create legislation requiring a seller with nexus in that state to pay tax on sales of tangible property within the state.

What is nexus and how does it affect your business?

What Happens If You Misclassified a Worker?

April 23, 2026October 19, 2016 by Brotman Law

Key Takeaways

What does the employment classification of workers have to do with payroll tax audits.
Previously, we have posted about the difference between employees and independent contractors in the eyes of the IRS and the EDD. Here is a quick reminder.
There is an entire list of factors the EDD (and the IRS) use to determine whether or not someone is an employee. No single factor can be used to make the determination.

What does the employment classification of workers have to do with payroll tax audits?

Everything.

When the Employment Development Department of the State of California decides to audit, the classification of your workers is the auditor’s sole concern. Additionally, the IRS often adopts the results of the EDD audit to use in assessing federal penalties.

For this reason, it is critical to classify your workers properly and supply only the information the auditor asks for, nothing more.

What Are Your Payroll Tax Responsibilities?

April 23, 2026October 12, 2016 by Brotman Law

Key Takeaways

Such employers see this as a cost-saving for their businesses because they not only do not have to pay taxes, they do not have to pay for someone to administer employee taxes.
Social Security and Medicare, otherwise known as FICA, is paid quarterly. FUTA, the federal unemployment tax act, requires an annual return. Employers are required to provide an IRS Form W-2 detailing the wage withholdings.
Very small employers, defined as those with an estimated tax liability of $1,000 or less for a calendar year can file annually.

In a previous post, we talked about the difference between independent contractors and employees. One of the biggest differences, and one that often drives intentional worker misclassification, is that employers must withhold and pay payroll taxes for employees whereas they do not for independent contractors.

Classifying Employees and Independent Contractors

April 23, 2026October 5, 2016 by Brotman Law

You have hired someone to do work for you. Is that person an employee or an independent contractor?

The answer is important because misclassifying an employee as an independent contractor, whether intentionally or through ignorance, can land you in court and in debt for payroll taxes.

There are several tests from a variety of regulatory agencies that are used to try to determine employment status and occasionally changes are made to the standards. Even if you classified certain of your workers correctly before, you might need to revisit the question to ensure you remain in compliance.