The California EDD is actively targeting independent contractor misclassification and seeking substantial tax revenue from San Diego and California employers. While the federal agencies may have seemed to relax based upon administration policies, the California agencies are making this a primary focus. If you have 1099 workers or independent contractors as part of your business strategy it is important to contact us or call today to schedule a free consultation at 866-631-3470.
Employee or Independent Contractor?
What are the core issues of employee misclassification and why should you be concerned the California EDD is still targeting independent contractor misclassification across the state? The short answer: money; YOUR money. The California Employment Development Department (EDD) audits almost every California corporation with employees or workers every three years. It’s not a question of “if” it is a question of “when.” The first question asked of California and San Diego employers as the EDD is actively targeting independent contractor misclassification is “do you have any 1099 workers?” If you do, be prepared for an extensive examination which carries extensive penalties the risk of a six figure price tag per employee.
The primary question is the percentage of income derived by the “independent contractor” from your business. If they receive 60% or more of their income from your business you are in for a tough audit. The economic relationship between the parties will be examined. How is the independent contractor paid? (Hint: if it is through the company’s payroll process a huge red flag goes up). Does the independent contractor have their own business entity? How and when was the entity formed and who paid for this process? How long has the independent contractor done work for your company?
There are several other factors which will weigh into the conversation. One thing is abundantly clear: the EDD is not asking a lighthearted question. The EDD is actively targeting independent contractor misclassification. They are seeking hard tax revenue. If 1099 workers or independent contractors are found to be misclassified employees prepare to write a substantial series of checks.
Allen Barron protects business owners who face an EDD audit. We work with existing businesses to review 1099 and independent contractor relationships to prevent misclassification exposures. The risk to your business may be the survival of the company itself. Protect yourself and all that you’ve worked to build. Contact us or call 866-631-3470 for a free consultation today.
