Thank you for your patience. So the EDD does have a "IRS Exchange Agreement" whereby they provide the results of the audit to the IRS; this can definitely trigger a personal audit, especially if the audit resulted in personal income. Some CPAs will amend the tax return to include the excluded income, to "head off" an audit so to speak;
Also I am not sure if you are aware, but there is a system called the automated underreporting program where the computers will compare information from third parties (ie employers, financial institutions, etc) to determine if the tax payer is underreporting. So for example, if the interest earned on an account would indicate there is a large sum of money (larger than one would expect based on earned income) that can raise red flags.
So while the odds of an average person being audited is low (1/119 for a paper audit; 1/330 extensive audit) there are red flags such as self employment, audits by other agencies, etc and once those red flags are triggered it greatly increases one's odds.
I would strongly encourage you to hire a tax attorney (there is a specialty called LLM which means the individual has the standard JD and a masters in tax law). Link to the state bar referral:
Regardless of paying the EDD tax, the results will be shared with the IRS so they will have that information.
If one pays the fines, the attorney would file a motion to dismiss for the appeals case.
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Information provided is for educational purposes only. Consultation with a personal attorney is always recommended so your particular facts may be considered. Thank you and take care.