How to Prepare for an EDD Employment Tax Interview in California
If you've received a notice from the California Employment Development Department (EDD) and they want to schedule an "employment tax interview" — don’t take it lightly.
This isn't just a Q&A session. It's part of a formal payroll tax investigation, and what you say can directly affect how much the EDD assesses against you in back taxes, penalties, and interest.
At Boulanger CPA and Consulting PC, we represent California businesses through every stage of EDD audits — including these high-stakes interviews that often start with EDD payroll tax audit triggers. In this post, we’ll explain what to expect during an EDD employment tax interview, what the auditor is really trying to uncover, and how to prepare strategically to avoid common (and costly) mistakes.
What Is an EDD Employment Tax Interview?
An EDD employment tax interview is a structured meeting between the auditor and the business owner or their representative. It usually happens at the beginning of an audit but may also occur mid-process or during a worker classification dispute.
The auditor uses this interview to:
- Determine how you classify workers (W-2 vs. 1099)
- Understand your business operations
- Identify payroll tax obligations
- Confirm compliance with EDD, UI, and PIT requirements
- Look for potential fraud or willful misclassification
It’s not a casual meeting. It’s a critical phase in building the auditor’s case.
What You Say Can Be Used Against You
Many business owners believe they’re just “helping” the auditor understand their business — but even honest answers can lead to unintended consequences.
Examples:
- Saying a worker “only works for me” → Flags misclassification
- Saying you “pay them weekly in cash” → Triggers a deeper payroll investigation
- Admitting “we didn’t know we had to file payroll forms” → Opens the door to negligence penalties
This is why we never advise attending this meeting alone. Knowing how to survive an EDD audit starts with limiting what you say and having professional representation.
What the EDD Will Ask During the Interview
Typical topics covered include:
- Business structure and ownership
- List of all workers (employees, contractors, temps)
- How workers are paid (check, cash, Venmo, Zelle, etc.)
- What services your contractors provide
- Whether workers have other clients or set their own hours
- Who controls work schedules, tools, or methods
- Whether contracts exist with 1099 workers
- Whether you've previously been audited by EDD or IRS
They may also ask to speak with your bookkeeper, office manager, or payroll processor.
Mistakes to Avoid During the EDD Interview
1. Talking Too Much
Answer only the question asked. Do not elaborate, speculate, or offer explanations unless advised by your representative.
2. Attending Without Representation
You have the right to have a CPA, EA, or attorney present. Take advantage of it.
3. Making Verbal Promises or Admissions
Statements like “we’ll start issuing W-2s next year” can be interpreted as an admission of current noncompliance.
4. Guessing When You Don’t Know
Say “I’ll need to check the records and get back to you” instead of giving inaccurate or speculative answers.
How to Prepare Before the Interview
Hire an EDD Audit Specialist
A CPA experienced in EDD procedure will manage the interview, prep your documents, and insulate you from direct questioning.
Review Worker Classifications
Go through each contractor and verify whether they pass the ABC test or Borello test. Flag any gray areas. This is where EDD reclassification penalties explained becomes critical, since misclassifications often result in heavy liabilities.
Assemble Key Documents
Gather:
- Copies of 1099s and W-2s
- Independent contractor agreements
- Proof of other clients or business licenses for contractors
- Payroll records and bank statements
- Job descriptions and payment methods
Prepare Internal Talking Points
If you or your staff must speak to the auditor, be clear and consistent. We often script responses for clients to reduce risk.
Real-World Example – How a One-Line Answer Created a $41K Problem
A client in Orange County told the EDD auditor, “He’s not really a contractor — we just pay him cash to help out.” That statement led to a full classification audit and an assessment of over $41,000 in back payroll taxes, penalties, and interest.
We took over the case mid-audit, reclassified the worker correctly, and reduced the liability to $8,400. In many cases, avoiding these mistakes early is the key to how to survive an EDD audit without crippling penalties.
EDD Audit Defense for California Business Owners
We represent clients in:
- Orange
- Anaheim
- Santa Ana
- Irvine
- Los Angeles
- San Diego
…and statewide
Whether you’re preparing for an interview or already mid-audit, we can take over communications and protect your interests.
Don’t Speak to the EDD Without Backup
The employment tax interview is where the EDD builds its case. Let’s make sure you don’t hand them the rope they’ll use to hang you.
📞 Call (657) 218-5700 or Schedule Your Confidential Audit Strategy Session
And remember — you can explore more in Defend What’s Yours to learn strategies that protect your business from EDD, CDTFA, and IRS enforcemen.
Frequently Asked Questions
What is an EDD employment tax interview?
An EDD interview is part of a payroll tax audit where the auditor asks questions about worker classification, payroll practices, and recordkeeping to determine compliance.
Why did the EDD schedule an interview with me?
Interviews are used to clarify information on payroll tax returns, investigate potential misclassification of workers, or address discrepancies between IRS and EDD filings.
What should I bring to the interview?
Bring payroll records, W-2s, 1099s, timecards, employee handbooks, contracts with independent contractors, and proof of payroll tax deposits.
What questions does the EDD ask?
Expect questions about how workers are classified, who controls the work performed, whether benefits are provided, and how payroll taxes are reported.
Can I have a CPA represent me at the interview?
Yes. You are not required to attend in person. A CPA can represent you, communicate with the auditor, and protect you from making unnecessary disclosures.
What happens if I make mistakes during the interview?
Incorrect or incomplete answers can increase liability. Professional representation ensures your responses are accurate and defensible.
How should I prepare for an EDD employment tax interview?
Review your worker classifications, gather payroll documents, and consult with a CPA to anticipate auditor questions and strengthen your defense.
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📣 About the Author
Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.
He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.
With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.
Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.
Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.
📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.
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