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Employment Development Department (EDD). EDD Services. Employment Taxes Unemployment Insurance Employment Training Tax State Disability Insurance State Personal Income Tax Withholding. EDD's Tax Audit Program. Overview of Audit Program. 8 Area Audit Offices 165 Tax Auditors

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Presentation Transcript

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EDD Services

  • Employment Taxes

  • Unemployment Insurance

  • Employment Training Tax

  • State Disability Insurance

  • State Personal Income Tax Withholding



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Overview of Audit Program

  • 8 Area Audit Offices

  • 165 Tax Auditors

  • Audit for Four Taxes:

    • Unemployment Insurance Tax

    • Employment Training Tax

    • Disability Insurance Tax

    • Personal Income Tax Withholding


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Overview of Audit Program

  • We perform tax audits and investigations

    • 4,000 audits and investigations

    • $187 million

    • Average assessment amount: $46,000

  • Audits are recognized by the AICPA & qualify for CPA experience


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Overview of Audit Program

  • Resolve disputed benefit claims

  • Represent the State at tax and benefit hearings

  • Provide escrow releases, advisories, register new employers


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Nature of Employment Tax

  • You don’t need to be profitable to incur a significant liability

  • Many misconceptions

  • Employers need sound business plans


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Focus of the Audit Program

  • Bring employers into compliance who are:

    • Misclassifying workers as Independent Contractors

    • Not correctly classifying compensation to employees as wages


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Identifying Non-compliance

  • Obstructed Claims

  • Form 1099s

  • Underground Economy Operations (UEO)

    • Tax Enforcement Section (TES)

    • Employment Enforcement Task Force (EETF)

    • Economic and Employment Enforcement Coalition (EEE)


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Strategic Initiatives

  • Courier Industry

  • SUTA Dumping

    • An employer with a high UI rate inappropriately secures a lower rate through various simple or complex acquisitions


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SUTA Dumping Schemes

  • They have a high tax rate (6.2%)

    • Create a new entity and secure a new 3.4% rate

    • Purchased Shell Transaction

    • Nurse a low rate in an existing entity


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AB 664 - Effective January 1, 2005

  • Amends 1052 of the CUIC

    • Provides that this section, which allows for the transfer of the predecessor’s reserve account to the successor, is not applicable to any acquisitions made solely or primarily for the purpose of obtaining a lower rate


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AB 664 - Effective January 1, 2005

  • Adds 1061, CUIC

    • Mandates the transfer of the reserve account when the predecessor and successor have common

      • Ownership

      • Management

        or

      • Control


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AB 664 - Effective January 1, 2005

  • Adds 977(c), CUIC

    • Provides for the maximum tax rate plus an additional 2% for each applicable rating period


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AB 664 - Effective January 1, 2005

  • Adds section 1145 of the CUIC

    • For promoters who knowingly advise SUTA Dumping

    • Provides for a penalty $5,000 or 10% of the combined amount of underreported contributions, penalties, and interest


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Partnership with the IRS

  • Exchange of closed cases

  • Exchange of audit leads

  • Strive for synergy when developing our strategic plans



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CUIC Section 1236

  • Allows EDD to settle disputed employment tax issues when there is some risk of loss associated with litigating the case and when it is in the best interest of the State


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Settlements Case Requirements

  • Section 1236 of the CUIC requires the following:

    • The employment tax issue must be in dispute

    • The disputed issue is the result of assessment, appeal, or denial on a claim for refund

    • The risks and costs associated with litigation are consistent with a compromise of the tax liability


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Denial for Settlements

  • Audit cases in process

  • Generally cases involving fraud or an intent to evade provisions of the Code

  • Cases involving constitutional issues or where settlement will violate the law

  • Employer asserts only issues of fairness, financial hardship, or survivability of the business


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Taxpayer Advocate Office

  • If you are unable to resolve a payroll tax problem with an EDD

    • Representative

    • Supervisor

      and

    • Office Manager


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EDD Advocate Responsibilities

  • Independent status and review

  • Protect taxpayers’ rights

  • Adhere to agency tax laws

  • Identify trends and issues

  • Ensure courteous public treatment


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When Normal Channels Do Not Work

Fax

Phone

Mail

E-mail

Internet


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Helpful Websites

www.taxes.ca.gov

www.edd.ca.gov


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Employment Development Department

This concludes our presentation


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