State Unemployment Audit

[NECPA in NEBRASKA]

I have a client that won the state unemployment audit lottery. I don't do any bookkeeping, but do prepare the quarterly and annual payroll reports and the 1120S. They want to look at everything for the year, which I don't think will be an issue. Is this something that I may leave up to my client or do I need to represent them. I absolutely don't know where I will find any time and I am also not allowing anyone in my home office. I don't have any of the records, except for copies of the payroll records that they give to me and the reports that I issue. I can always get the records here and tell the auditor to wait until it cools down so that my garage isn't 95 degrees. It's good enough for my clients that don't want to send me their signatures. 

[DANRVAN]

The general rule is never let an auditor and client meet, especially for a form you prepared.

How about requesting a correspondence audit?

[ILLMAS]

Does your client have any subcontractors?  Most likely its for testing for independent contractor status.

[Lee B]

My past experience with these audits is:

1.  Reconcile payroll records with quarterly reports

2.  Review any subcontractors with Form 1099s to see if their classification is appropriate

3.  Review Cash Disbursement and GL Records for payments to individuals with no 1099s.

All of mine have been audits in my office. 

[DANRVAN]

3 minutes ago, cbslee said:

My past experience with these audits is:

1.  Reconcile payroll records with quarterly reports

2.  Review any subcontractors with Form 1099s to see if their classification is appropriate

3.  Review Cash Disbursement and GL Records for payments to individuals with no 1099s.

All of mine have been audits in my office. 

That has also been my experience with Oregon Employment Dept., but auditor was happy to have it done by correspondence (email) vs 4 hour round trip to my home office.

[NECPA in NEBRASKA]

Thanks, everyone.  I will get a POA from client for this. I've never had anyone in over 40 years have an unemployment audit. I don't know how well a correspondence audit will work, but I can ask. That would probably beat sitting in my garage. I do not want Covid again and I don't want to spread it. We were exposed to it two weeks ago, but thankfully, tested negative. 

 

[BulldogTom]

1 hour ago, NECPA in NEBRASKA said:

Thanks, everyone.  I will get a POA from client for this. I've never had anyone in over 40 years have an unemployment audit. I don't know how well a correspondence audit will work, but I can ask. That would probably beat sitting in my garage. I do not want Covid again and I don't want to spread it. We were exposed to it two weeks ago, but thankfully, tested negative. 

 

Get the POA, then share your Covid concerns with the auditor.   I am fairly certain they will want to do this via correspondence (they probably don't like going to offices where they don't know the people either).   Follow the advice above.   When I have done these in the past, I will try to know the results before the auditor sees anything.   And if something was missed, I lead with that item and agree to that adjustment right off the bat.   No sense trying to hide something.   I find it buys some goodwill if you admit there was a mistake and it is corrected.

Tom
Modesto, CA

[NECPA in NEBRASKA]

1 hour ago, BulldogTom said:

Get the POA, then share your Covid concerns with the auditor.   I am fairly certain they will want to do this via correspondence (they probably don't like going to offices where they don't know the people either).   Follow the advice above.   When I have done these in the past, I will try to know the results before the auditor sees anything.   And if something was missed, I lead with that item and agree to that adjustment right off the bat.   No sense trying to hide something.   I find it buys some goodwill if you admit there was a mistake and it is corrected.

Tom
Modesto, CA

I will do that. I don't expect there to be any payroll mistakes on my part. I don't prepare their payroll, just use their quarterly numbers. They give me the amounts for 1099s. I hope that seeing everything will not open problems for anyone, including me, on their income tax.

[Lee B]

Since you don't do their bookkeeping, there will more than likely be questions that you can't answer regarding 1099s and payments to individuals.

[Medlin Software, Dennis]

Just thinking.  If you prepare even one payroll report (with your signature, not a ghost prep scenario) you likely have inserted yourself into the liability pool for the entire payroll.  Personally, if I touch a payroll, I take it all (all or nothing) for this reason.

[Lee B]

3 minutes ago, Medlin Software said:

. . . . .  Personally, if I touch a payroll, I take it all (all or nothing) for this reason.

What does that mean?

[Medlin Software, Dennis]

Just now, cbslee said:

What does that mean?

If I am signing a payroll form, I do it because I have prepared or been responsible for every paycheck, and deposit, so I am comfortable it is accurate with no outstanding items to cause issues.  The liability chain is too onerous for me to sign forms if I do not have full knowledge/control of the underlying information.

Example.  Business owner disappears (fraud, mental health, etc.) with outstanding payroll obligations.  If I had the authority to sign forms, any access to banking process, etc., I am on the hook.  Maybe I can defend, but defense is expensive in time and money.  This is maybe a once a career situation, but it does happen.

[NECPA in NEBRASKA]

I have no control over payment for any of my clients. Heck, I still make them mail 941s. I have sent clients away when they decided to add employees, because I have been gradually getting rid of what I have. This client uses a payroll program and the reports that they give me are good.

[Medlin Software, Dennis]

Contrarian as often the case?  "I don't prepare their payroll" means "I do not handle audits based on data/figures/choices I had no control over". "This client uses a payroll program" They have taken on responsibility for their payroll, and should be doing so in all respects, audits, reports, etc.  Any fair PR software will have the reports they need.