Getting Ahead of the Game: How to Pre-Audit Before an EDD Payroll Tax Audit
No company ever wants to see that envelope stamped with “Employment Development Department” land in their mailbox. Payroll tax audits can feel overwhelming, even if you think you’ve done everything right. But here’s the truth: much of the stress comes from being caught off-guard. Preparing in advance—conducting what’s often called a “self-audit”—can save you sleepless nights, penalties, and a lot of scrambling. So, how do you pre-audit yourself before the EDD does it for you? Let’s break it down. Start with the Basics: Employment Classification This is where a large chunk of audits turn messy. Independent contractor vs. employee—sound familiar? The state is particularly focused on this distinction. Take a hard look at your staff. Are any “independent contractors” actually working with you like full-time employees? Do they follow set hours, use your tools, or take direct supervision? If the answer is yes, that classification might be risky. A smart move is reviewing contr...