The Employment Development Department audits employers for UI, SDI, ETT, and worker classification. It is separate from the IRS and can reach back several years.
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Educational only · Last reviewed May 30, 2026
The Employment Development Department administers California's payroll tax programs, including:
EDD is not the IRS. A clean federal return does not prevent an EDD audit.
Common reasons include:
EDD can examine multiple quarters. Assessments may include unpaid contributions, interest, and penalties. Officer liability can apply in some cases.
EDD cares about employment status and reported wages, not whether your Schedule C deduction is allowed.
Examiners verify wages were reported correctly, contributions paid, and workers classified properly. Officer compensation and cash wages are common issues.
Read article →Consistent quarterly filing, timely deposits, written contractor agreements, and clean payroll registers make EDD audits manageable.
Read article →A clean IRS year does not mean EDD will not audit—and vice versa. Compare what each agency cares about and how to prepare for both.
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