The first thing I’d like to discuss is the Record keeping requirement in California for businesses. There are a few statutes in California that you need to be made aware of. One is the CUICU, which is the California unemployment insurance code, and that’s section 1085 and that states that all employers are required to keep a true and accurate work record for all of their employees. It puts the affirmative burden on the employer to keep accurate records with respect to all their employees and the hours that they work.
It’s not the requirement of the employee, rather it’s the requirement of the employer to maintain those records which is really important because when you get into situations where you are penalized for the failure to maintain records the state is going to seek to put that affirmative burden and it’s going to point to that statute. The second statute is CUIC 1088, which requires the timely filing of all payroll tax returns and requires that they would be reported accurately. The filing of tax returns is the basis that the state uses to penalize you when you fail to file a return or when there is a deficiency that is owed on that return and there’s a state an inaccuracy. 1088 is the statute that governs that.
The third issue that I want to bring up is CUIC 1092 which is the employer’s obligation to make books and records open and accessible to the Employment Development Department. This statute is important because number one it places the affirmative burden for you to as a private company to make your records available for inspection by government agents. That is a requirement of businesses in California that you give the government access to your payroll records so they can confirm the proper amount of liability.
The second thing to keep note with this particular statute is that it places affirmative penalties at least creates the structure for affirmative penalties as the result of the failure to keep records or to destroy records. In cases where you take affirmative action not to make your records available, the state can impose penalties, some of which we’ll touch on, against you for failing to give the Employment Development Department access to the records that they need.
These three statutes assert the affirmative requirement of businesses to keep and maintain payroll records and make those records available to the government for inspection. That’s really important because that sets the tone for a payroll tax audit as you move forward.
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