Misclassified Workers? Facing an EDD Audit? You're Not Alone — and You're Not Out of Options.

The Employment Development Department (EDD) aggressively enforces California’s payroll tax laws. If you’ve received a notice of audit, a demand for payment, or a lien from the EDD, you could be facing thousands in penalties — especially if the agency claims your workers were misclassified.



At Boulanger CPA and Consulting PC, we represent employers throughout Orange County and all of California in EDD audits and collections. We defend against classification errors, help resolve audit findings, and work to protect your assets and business.

What Triggers an EDD Audit?

The EDD doesn't just randomly select businesses. Common triggers include:


  • A former 1099 contractor files for unemployment
  • A tip from a disgruntled ex-worker
  • Your 1099 filings don’t match your business activity
  • You’ve previously been audited by the IRS, FTB, or CDTFA
  • Your business operates in a high-risk industry (construction, salons, hospitality, etc.)



Once triggered, the EDD will examine whether your independent contractors should have been treated as W-2 employees — and if so, you could be facing years of back payroll taxes, interest, and penalties.

What the EDD Is Looking For

During the audit, the EDD examiner will request:


  • A full list of workers paid as contractors
  • Copies of 1099s and associated agreements
  • Payroll records (if any)
  • Bank statements and check registers
  • Work schedules, job descriptions, and more


They'll apply California's ABC test and Borello factors to determine whether your 1099 contractors were misclassified.


If they decide your workers should have been employees, you could be liable for:



  • Unpaid unemployment insurance (UI)
  • State disability insurance (SDI)
  • Employment training tax (ETT)
  • Personal income tax (PIT) withholding
  • Plus interest and penalties going back 3+ years


How We Help You Fight Back

We don’t take the EDD at face value. We investigate your case, analyze your worker relationships, and push back hard where they overreach. As an OC CPA who works with businesses across California, we’ll help you:


  • Respond to EDD audit letters and initial document requests
  • Determine whether your contractors meet exemption standards
  • Prepare worker classification analysis and arguments
  • Negotiate audit scope and findings
  • File protests and appeals if needed
  • Explore settlement options or payment arrangements
  • Coordinate with EDD, IRS, and FTB if your case overlaps jurisdictions


Whether you’re mid-audit, facing a new assessment, or have just received a notice, we’ll take over the process — and protect your business from further damage.

Real Example: From $148,000 EDD Bill to $12,000 Settlement

A small business owner in Orange County was hit with a $148,000 EDD assessment over three years of 1099 worker payments. After we stepped in, we challenged the classification analysis, disputed several workers' inclusion, and negotiated the penalties down. The case ultimately settled for just over $12,000 — saving our client more than $135,000.

Why Work With Us?

Boulanger CPA and Consulting PC isn’t a call center or a mass-market tax shop. We’re a boutique firm focused exclusively on high-stakes tax resolution and audit defense. Here’s what makes us different:


✔ Licensed California CPA — not a sales rep
✔ Deep experience with EDD, FTB, CDTFA, and IRS procedures
✔ Strategy-first approach tailored to your situation
✔ Transparent pricing — no scare tactics or surprise fees
✔ Virtual and in-person service available statewide


When the EDD is involved, getting it wrong can cost you your business. Don’t try to go it alone.


Schedule a Confidential EDD Audit Strategy Call

If you're facing an EDD audit, notice of assessment, or payroll tax dispute, we can help. Get direct support from an OC CPA who knows California enforcement inside and out.


Call (657) 218-5700 today.

Frequently Asked Questions About EDD Payroll Tax Audits

Why did I get selected for an EDD audit?

EDD audits are often triggered by 1099 filings, unemployment claims, or worker complaints. Random audits also occur for high-risk industries like construction, salons, and healthcare.

What’s the penalty for worker misclassification?

You may be liable for back payroll taxes, penalties, and interest. The EDD may also assess additional penalties for fraud or negligence if they believe you acted willfully.

How far back can the EDD audit?

Typically three years, but up to eight years in cases of fraud. We’ll review the scope and challenge improper expansions.

Can the EDD still audit me if my business is closed?

Yes. The EDD may audit closed businesses and pursue former officers or owners personally for unpaid payroll taxes.

Do I need a CPA or tax attorney for an EDD audit?

A CPA who specializes in California payroll tax audits can often resolve these faster and more affordably. We handle worker classification defense, audit appeals, and negotiations.