One file, all three agencies
EDD, CDTFA and FTB findings feed each other and feed the IRS. We work them together rather than one at a time.
IRS Problems
The state agencies are the ones that close businesses
An EDD or CDTFA audit reaches back years, applies a method rather than counting, and lands on businesses that never had a federal problem at all.
The EDD audits how you classify the people who work for you. A single unemployment claim from someone you paid on a 1099 is enough to open one. Under California’s ABC test the burden sits on the business to prove the worker was genuinely independent, and a reclassification finding recalculates employment taxes, penalties and interest across the audit period — reconstructed from your DE 9 and DE 9C quarterly filings against what the auditor believes should have been reported.
The CDTFA audits sales and use tax, and it rarely counts transactions one by one. It applies a method: a markup analysis that reprices your purchases at an assumed margin, a shelf test, an observation test that watches a few days of sales and projects them across three years, or a credit-card-to-cash ratio. If your records do not rebut the method, the method becomes the assessment. That is why California audits so often hurt more than federal ones — a federal examiner disallows a deduction you claimed, while a state auditor can build taxable sales you never recorded.
Scope
What’s included
EDD worker-classification defence
Each role tested against the ABC test and the statutory exemptions, with the contracts and invoices that support it.
DE 9 and DE 9C reconciliation
Quarterly wage filings reconciled to payroll records and to the federal returns before the auditor reconciles them for you.
CDTFA method challenge
Markup percentages, observation-test periods and sample selections are assumptions. We test them and propose better ones.
Records package assembled
Sales journals, purchase invoices, register tapes and bank deposits organised in the order the auditor works through them.
Petitions and appeals
A Notice of Determination or Notice of Assessment can be petitioned on a deadline. We file it and argue the case.
FTB notices and demands
Demand-to-file letters, proposed assessments and business entity notices from the FTB answered on the same file.
Outcome
Why it matters
Method beats argument
Most state assessments are won by changing the sample or the assumption, not by disputing individual transactions.
Spanish-speaking representation
Auditors interview owners and staff. Those conversations happen in the language you are comfortable in, with us present.
Process
How it works
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Read the engagement letter
The opening letter states the period, the tax and the records requested. It also states what is not being audited.
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Control the flow of records
Records go through us, in the scope requested. Volunteering more is how a one-period audit becomes a three-year one.
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Work the method
We examine how the auditor built the number and put a documented alternative in front of them before the findings are drafted.
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Settle or petition
Findings are discussed at a closing conference. If the result is still wrong, we petition within the deadline.
Suited to
Who this is for
- Restaurants, bars and markets under CDTFA examination
- Construction, landscaping and trucking firms paying crews on 1099s
- Salons and barbershops renting chairs or stations
- Employers who received an EDD audit notice after a claim
- Businesses with a Notice of Determination already issued
FAQ
Questions
The state agencies select differently. The EDD often opens an audit because one worker filed an unemployment claim, and the CDTFA selects on industry, cash intensity and how your reported sales compare with others like you. Neither one needs a federal audit to start.
An observation test is a standard CDTFA technique, and the days chosen matter enormously because the result is projected across the whole audit period. If a test is going to happen, it should happen on representative days with someone watching how it is conducted. That is a conversation to have with representation, not on the spot.
The agencies share information, and a state reclassification commonly leads to federal employment tax exposure as well. That is why we look at the federal consequences while the state audit is still open rather than after it closes.
Often needed alongside this
Other services
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Payroll Tax & Trust Fund Penalty
Unpaid payroll tax is treated differently from every other balance — it can be assessed against you personally, not just the company.
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Sales Tax & CDTFA Compliance
California layers district taxes on the state rate, treats marketplace sales differently, and audits sellers more actively than most states.
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IRS Representation & Audit Defense
Sign a Form 2848 and every letter, every phone call and every deadline becomes ours to manage.
Let’s find out what you should actually be paying.
Thirty minutes with an Enrolled Agent, at no charge. Bring last year’s return and we will tell you plainly what we would do differently — and what it would cost.