You need to beware of California EDD attempts to reclassify 1099 workers as “employees” in San Diego. The EDD recently announced a new strategy to pursue audits to re-classify independent contractors as employees, thereby creating a payroll tax obligation for California businesses. Your exposure also extends to bast benefits and overtime wages with a look-back period of up to 5 years or more.
We have had recent success appealing an arbitrary decision when the EDD attempts to reclassify 1099 workers. The consequences for any California employer can be substantial. In effect, the EDD makes a “determination” that 1099 independent contract employees are mis-classified, and should be considered direct employees of the business. This creates an immediate and substantial tax liability and the business would therefore owe the State of California back taxes, penalties and interest.
That in and of itself is a reason to stand up to the EDD, and we invite you to call 866-631-3470 for a free consultation if this has happened to you. But it doesn’t end there. Once California has made its determination the next knock on the door comes from the IRS – and the resulting taxes, penalties and interest at the federal level will make the California taxes look like a speeding ticket.
Avoid EDD attempts to reclassify 1099 workers. It may be time to review your underlying business strategy.
If you have 1099 independent contractors in the State of California you need to be vigilant. The old guidelines that have served as a reference since last century have completely changed, and it is important to stand your ground and protect your rights and your bottom line. Businesses work hard for their income, and while this is a creative way to create a California tax liability, it doesn’t mean it will hold up upon review.
We invite you to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470.
