Payroll tax fraud is more common than you think. It does not necessarily always involve an intentionally criminal act in order to violate the tax laws. The Employment Development Department (EDD) is responsible for identifying payroll tax fraud and typically acts very swiftly when it finds about about potential fraud. This can happen just by mistakenly providing the wrong employee information to the EDD or not providing enough information about an employee. If there is a misunderstanding between your payroll department and the EDD, this can be something that is rectified with the EDD, but it is much easier to handle with a skilled attorney negotiating on your behalf. The worst thing you can do is ignore a notification from the EDD that your business is under investigation for payroll tax fraud because it could lead to very serious consequences down the line.
Some businesses attempt to hire employees “under the table” to avoid responsibility for payroll taxes. Instead of paying those employees in the traditional sense, businesses will use a cash system to try to avoid detection by the EDD. Another way that businesses get in trouble with the EDD is by improperly classifying employees as independent contractors so that they do not have to pay payroll taxes for them. If an employee is working for a business on a regular basis, he or she is not truly an independent contractor. The classification of regular employees as independent contractors is an issue that spans many different industries. Small businesses often think that they can more easily skirt the line on this issue because the size of their payroll is not large enough to catch the government’s attention. This is not a good approach to take when it comes to managing your business’s payroll because it can land you in a world of hurt very fast.
If you receive notice that your business is under investigation by the EDD, you should act quickly to hire an experienced payroll tax fraud lawyer to help you navigate through this scary and intimidating process. You could be subjected to search warrants and surveillance if the EDD investigation is based on suspicion of criminal activity. This is not something that you want to face without the support and advice of a talented lawyer on your side. Even if you had no intention of doing anything criminal, your business could be exposed to heightened scrutiny from the government just by being flagged for potential payroll tax fraud. This can lead to negative press and is a risky situation for any business to find itself in.
When it comes to choosing a lawyer to defend your business in a payroll tax fraud investigation, you should make sure that your attorney has experience in this area of law and can point to other business clients who have received favorable outcomes. A lawyer should be able to negotiate a more favorable settlement on behalf of your business with the EDD. Even if you end up having to pay out of pocket for payroll taxes owed, you may get a much better deal with the government by relying on the representation of an experienced attorney.
Even though finding out that you may have an issue with payroll tax fraud can be daunting at first, responding to the investigation quickly and in a way that will not harm your business in the future is within your control. Consulting with a trusted payroll tax fraud lawyer is the first important step you can take in making this problem a thing of the past. Make the decision today to do something about your payroll tax fraud problem so that your business can continue to prosper.