Generally What is the Firm's Strategy? When Handling Payroll Tax? Audits payroll tax audits are best handled from a measure twice cut once approach so the important thing at the beginning of the audit is to have a plan even before diving into the with the auditor you want to have a clear plan for how the audit is going to go and the second thing that you want to do is pre audit so basically the goal should be I want to walk into the audit meeting and basically have the audit done so that you're basically handing over a binder walking the auditor through the audit as if you've already done it like I'm the auditor and I'm presenting the case to their supervisor you want to have that level of efficiency and organization because what happens is you go to these audit meetings and then you leave these audit meetings and the auditor sits there and spends like three or four months digging up other information on their case and dealing with all their other cases and calling independent contractors so a lot of times what will happen is there's a familiarity with the materials that you're presenting but they're not going to remember it like word-for-word like the auditor is not going to make a decision on the spot and let you walk away so if you have a very good organized presentation then it will greatly assist when the audit writes their report sometimes you'll get lucky and you'll see when you go to EDD audit meetings that the auditor walks you'd be typing things in and writing their reporters they go so that they have less work to do later this is great, because it allows you to speak and feed words into the auditors head which then naturally go into their audit report that's great but if you do the art for them and you present them with it the you've basically given them a big carrot say hey here's your audit you don't have to do any work just agree with our result and we're done and that's the best way to handle it because number one you get all the issues out in front you present them in the best light possible and then you work to really mitigate penalties which is the real killer in EDD audits I've mentioned before the penalties in the ayaats are sometimes four or five times the amount of the tax so so you really want to slim those down and if you can control the scope of the audit you can control the focus and walk breadcrumbs you're generally going to have the most success possible and you're going to ace your payroll tax.