After companies including Uber, Lyft, DoorDash, and others spent nearly $200 million campaigning for the addition of a ballot measure exempting them from the previously passed California AB5 ruling. They won, and so began Proposition 22.  The passing of Proposition 22 protects drivers’ preferences to remain classified as independent contractors with the flexibility to work when, where, and how long they want. A notable aspect of the passing of Prop 22 is that future reform…

Despite everyone’s awareness that tax day is rolling around each year, many companies still end up leaving their filings until the last minute. As a result, the last-minute filings can easily lead to accidental mistakes when filing.  Nobody wants to intentionally make mistakes, but especially when it deals with your taxes. Why? Because mistakes on your tax return are often a red flag for IRS to investigate further.  So how can you properly prepare to…

On January 7th, 2021, the US Department of Labor (DOL) announced the updated ruling to clarify its interpretation of independent contractor status as part of the Fair Labor Standards Act (FLSA).  Overall, the ruling stands largely unchanged from the original ruling which established a tiered test to determine employee versus contractor status as part of the FLSA. The updated proposal establishes a two-part analysis to determine whether a worker’s correct status is that of an…

IRS selects returns for audit based on numerous criteria.  Here are some common ways your return can be selected for an audit: You fail to report income that reported on a W2 or 1099 (this can be from a sale of real estate, 1099-S; non-employee compensation as an IC; 1099-MISC now a 1099-NEC (non-employee comp); or withdrawing proceeds from a retirement account, 1099-R) You fail to report all of the income received by your business. …

In short, yes. If you are paying workers who are not reported on a 1099 or W2 (for instance you are paying workers in cash and have no record of their payroll or payments), EDD may assess a fraud penalty and could open a criminal investigation. If your contractors are misclassified and should be employees, then you likely do not have WC insurance, which is insurance fraud. What is more common are investigations of construction…

If IRS selects your return for an audit, the audit will generally cover a 3 year period. That is the statute of limitations IRS has to audit a tax return. More specifically, this is 3 years from the date you file your return. If you filed the last 5 years of your tax returns last year, IRS will have a couple more years to open all those returns for an audit. If you have a…

How long does an EDD audit last? If EDD selects your company for an audit of your contractors, you can expect the audit to last between 3 months and 9 months.   The purpose of an EDD audit The purpose of an EDD audit is to determine if your workers are really employees and the audit starts when you receive a letter titled “Inquiry Regarding Records” that includes a “Pre-audit Questionnaire.” Why does the audit take…