Can I Go to Jail for Errors on My Payroll Tax Returns?

Absolutely. So the EDD is like any other tax organization in California. If they want you for payroll taxes and they see evidence of criminal activity, they can refer you to the EDD Criminal Investigative unit and that unit can make a recommendation to the district attorney. We see this all the time in cases where there was a failure to report payroll or where there's very serious fudging of the numbers with payroll tax returns. So if you think that there's any criminal liability at the start of the case you want to work to mitigate that issue as quickly as possible and the way that you do that is to throw as much cold water on the idea that your errors were willful as possible. If you can dampen down the willfulness, there's a good chance that you can avoid criminal liability on the payroll tax side of things because the EDD only has limited resources to send cases criminally. So if you're open about what the errors are, if you can explain your way out of them, if you can reduce the seriousness of them or at the very least mitigate any sort of willfulness, that's your best way to avoid criminal liability. Again I think it's a good idea in general to have a tax attorney retained in an EDD audit, but especially if you're facing criminal liability. Get somebody on the team, get a criminal tax attorney involved and get somebody who's going to be able to know what they're doing and guide you through that process.


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law