Pricing & Fees
How Much Does an EDD (Payroll Tax) Attorney Cost?
Fee ranges for California EDD audit defense, worker classification disputes, and personal liability defense under CUIC §1735.
EDD payroll tax audit defense typically costs $7,500 to $25,000. Personal liability defense under CUIC §1735 adds $5,000 to $15,000. Worker classification audits with AB5 implications can exceed the high end materially.
EDD audits are the California analog to IRS payroll tax examinations, with one critical difference: the EDD is aggressive on worker classification, and the post-AB5 landscape has made classification audits more frequent and more expensive to defend.
Fee Ranges by EDD Matter Type
| Matter Type | Typical Fee Range | Fee Structure |
|---|---|---|
| EDD audit (small business, no classification issues) | $7,500 – $12,500 | Flat fee |
| EDD audit (worker classification / AB5 issues) | $12,500 – $30,000+ | Flat or hourly |
| Personal liability defense (CUIC §1735) | $5,000 – $15,000 | Flat fee |
| EDD appeal (CUIAB) | $10,000 – $25,000 | Flat or hourly |
| EDD offer in compromise | $5,000 – $12,500 | Flat fee |
| Installment agreement negotiation | $2,500 – $5,000 | Flat fee |
Worker Classification Drives Most EDD Defense Costs
Under California’s ABC test (codified by AB5), the burden is on the business to prove a worker is an independent contractor, not on the EDD to prove the worker is an employee. That shift is what makes AB5 classification audits expensive.
The ABC test requires the business to prove all three of: (A) the worker is free from control and direction, (B) the work is outside the usual course of the hiring entity’s business, and (C) the worker is customarily engaged in an independently established trade. Failing any one prong reclassifies the worker as an employee.
EDD audits that center on classification require building the legal record on each of those prongs, often for dozens of workers. The work is real, the legal analysis is fact-specific, and the assessments can reach hundreds of thousands of dollars on a mid-sized business.
Personal Liability Under CUIC §1735
California Unemployment Insurance Code §1735 imposes personal liability on responsible persons of a business for unpaid payroll taxes — similar to the federal Trust Fund Recovery Penalty under IRC §6672. Personal liability defense is a separate engagement from the underlying audit and is priced separately.
For more on the underlying audit work, see our EDD payroll tax practice page.
Frequently Asked Questions
EDD Attorney Cost FAQs
Does AB5 apply to my business?
AB5 applies broadly to most California businesses that use workers, with statutory exceptions for specific professions and arrangements (Business and Professions Code §7448 and related sections). The exceptions are narrower than they look. We assess applicability in the first call.
What is the difference between an EDD audit and a federal payroll tax audit?
Federal payroll tax audits focus on IRC §3401 employee/contractor classification and the trust fund recovery penalty under §6672. EDD audits focus on California’s ABC test under AB5 and personal liability under CUIC §1735. The standards differ, and a worker can be properly classified federally but misclassified under California’s stricter test.
Can the EDD assess a business that has gone out of business?
Yes, and the EDD often pursues responsible persons personally under CUIC §1735 in those cases. Personal liability assessments survive the dissolution of the underlying business entity.
How long does an EDD audit take?
Most EDD audits resolve in 6 to 12 months from initial contact through closing. Classification audits with multiple workers can take 12 to 24 months. The CUIAB appeal process adds another 12 to 18 months on top if you appeal.
Does the EDD have an offer in compromise program?
Yes. California has an EDD offer in compromise program that allows settlement of payroll tax liabilities when the business cannot pay in full. The standards are similar to the IRS OIC but procedurally separate. EDD OIC work is a defined-scope flat-fee engagement.
What is the EDD’s lead generation system and why does it matter?
The EDD uses several lead sources to identify audit targets, including unemployment claim filings, 1099 reporting, and inter-agency referrals. Understanding why your business was audited helps shape the defense strategy. We address the lead source in the initial scoping work.
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Worker Classification Audit?
The ABC test puts the burden on you. Defense work needs to start before the auditor reaches conclusions.
- Protected by attorney-client privilege
- Flat-fee options where appropriate
- We respond within one business day