The Expensive Mistake CA Employers Can't Afford

If you’re an employer located in and/or employ a team of Californian employees, paying taxes on time isn’t optional – it’s a legal obligation. Falling behind with the IRS or California’s Employment Development Department (EDD) can have serious financial and personal consequences. Below, we break down what employers need to know about some of the risks of late payroll tax payments and what steps to take if you find you or your company behind.

Federal Consequences (IRS)

The IRS takes payroll taxes very seriously because employers are collecting money on behalf of employees. If not, the employer can face failure to deposit penalties (2%-15% of unpaid tax and based on how late the payment(s) are), failure to pay penalty (0.5% per month, up to 24% of unpaid balance), interest (unpaid taxes and penalties until paid in full), trust fund recovery penalty (most dangerous and could leave owners, executives or payroll managers personally liable for 100% of the FICA portion), and even criminal exposure (if found to be willful evasion).

California Consequences (EDD)

The EDD enforces California’s employment tax laws and has its own set of penalties separate from federal laws which include late payment penalties (15% of unpaid tax), late filing penalties (additional 10% if returns are not filed timely), interest (charged until balance is paid in full), personal liability (EDD holds those responsible for handling payroll taxes personally liable for unpaid withholding taxes), and aggressive collections (EDD can file liens, issue levies, and garnish wages for unpaid balances owed).

Business Risks

Failure to pay employment taxes brings government penalties and can also harm your business by damaging credit and reputation as liens are public, loss of good standing with tax authorities and triggering federal and state audits, loss of potential professional licensing, certifications, and financing, and may increase scrutiny on future filings and payroll practices.

Final Thoughts

If you’ve missed employment tax payments, consider the following: Act quickly, set up a payment plan with tax authorities, and actively seek professional help from a trusted and local tax attorney to protect you from personal liability and negotiate with tax agencies. Employment taxes are not just another bill; they’re trust funds you hold on behalf of employees. The IRS and EDD treat late or unpaid payroll taxes as a serious offense. With swift action under the guidance of a trusted and local tax attorney, you can resolve issues before they spiral out of control.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

 

 

California Dreamin’? Not When the CDTFA Sends an Audit Notice

If your business receives a CDTFA notice for an impending audit, do not panic and review the notice and tax periods under audit – right away. The California Department of Tax and Fee Administration (“CDTFA”) is known for conducting thorough and often aggressive audits, especially as it relates to sales and use tax, fuel, tobacco, alcohol, as well as other taxes and fees that fund specific state programs. Whether you are a retailer, restaurant owner, contractor, or e-commerce seller, there are a few tips you should keep in mind when the CDTFA comes knocking.

Be sure to read the notice carefully, fully, and respond promptly to avoid missing the assigned response CDTFA deadline. Once you understand which tax period(s) are under audit, begin gathering the requested documentation and schedule time with your trusted and licensed local tax attorney immediately. No one should have to go through the audit process alone as CDTFA auditors are trained to uncover discrepancies. Small reporting errors can happen which could lead to unwanted questioning and misunderstandings surrounding industry-specific practices. Business owners will want to avoid accidentally volunteering unnecessary information. Additionally, your trusted and local tax attorney will know how to identify any overreaching or incorrect assessments that could be protected from CDTFA auditors. Your rights are protected and preserved throughout the process as a taxpayer which can be enforced by your tax attorney.

A few examples of the records that may be requested by a CDTFA auditor can include sales and purchase invoices, bank statements, sales tax returns, cash register tapes or POS reports, and exemption certificates (if applicable). Organization of business records is critical as business owners will want to avoid any opportunities for CDTFA auditors to overstate the tax liability within the tax period(s) under audit.

California businesses are often audited due to: tax filing inconsistencies (EDD, BOE/CDTFA, IRS), industry-specific benchmarks, unusual deductions or exemption claims, third-party tips or whistleblowers, etc. Your trusted and local tax attorney could help business owners get ahead of any of these possible issues by strategically maneuvering through auditor communications, challenging unsupported assumptions or estimates, or negotiating settlements or appeals.

If your business has received an audit notice or suspect you might be at risk, contact Wilson Tax Law Group, APLC  today so we can be an advocate in your corner, protect your business, minimize your liability, and stay compliant going forward. Leave it to our firm to help control the narrative and shape the outcome.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.