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I would agree with you, that the state agency will say you've been misclassifying. Yes, they can go back 4 years in California. But that's all they can go back. If you proceed very slowly with the exam, you might have the statute expire for the oldest year. Do NOT sign any agreement to "extend the statute of limitations" because they shove it in your face in a threatening way.
This is only for the California UI. So actually, the per employee charge may be quite limited.
Your real fear is the IRS.
You should strongly consider the IRS's Voluntary Disclosure initiative.
Considering the Voluntary Disclosure will limit the "book" being thrown at me?
from the IRS
Yes, absolutely, the payment for the IRS program is a fraction of what you would owe otherwise.
Cal WILL forward their results to the IRS.
So if I voluntarily disclose, is that basically admitting wrong doing even thought this happened due to my inexperience and ignorance towards classification until I received my audit notice.
I suppose that's one way to put it. You can read the IRS forms and see what you are signing.
I'm guessing I should wait to disclose to the IRS until after the audit by the EDD is complete? Or better to do this now?
No. Exactly the opposite. By then, you will have had a finding against you and are no longer eligible for the amnesty.
ah, should i google "voluntary disclosure" to find the forms?
Just a second
Voluntary Classification Settlement Program
You go just go to www.irs.gov
Ok, thank you very much for the help. So for CA I will only be "on the hook" for unemployment? Isn't there a $7,000 per employee per year cap?
Right, so you take the tax rate times $7,000. I think it's like $114 per employee, but don't quote me. I am not sure if they are going to
hit you up for SDI or not.
$114 per year per employee?
For the UI tax.
Ok, well thank you very much for your help & advice
But CA also has SDI which the EDD assesses. This is normally a tax that you turn around and deduct from your employees. So you really don't pay it. That's why I am not sure if they would assess that retroactively.
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You can also look me up here as the exam progresses. I have handled EDD audits before.