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REPORTING AND PAYMENT FOLLOWING AN ASSESSMENT FOR

MISCLASSIFIED WORKERS

When the Employment Development Department (EDD)

be prepaid to avoid the cost of accruing interest. The

determines that workers are misclassified as independent

advantage of prepaying the assessment is that

contractors and that the workers are actually employees,

employers who make contributions into a state

the determination applies to both past and future periods.

unemployment insurance fund, as required, generally

The Department’s Notice of Assessment serves as

are entitled to offset their FUTA taxes for amounts

official notice to the employer as provided by the

paid into the state fund. With this prepayment, the

California Unemployment Insurance Code (CUIC). The

employer’s petition converts automatically to a claim

employer should begin to report misclassified workers for

for refund of the disputed amount.

state employment tax purposes. The following

information will assist employers making business

If the employer pays the liability to avoid accruing

decisions regarding tax payments and wage reporting.

interest and the petition for review of a claim for

refund is resolved in the employer’s favor, the

Business Decision Options

Department will refund any amount that has been

overpaid plus interest, if funds are available.

As a result of the Department’s determination that

workers are employees rather than independent

2. Should a petition for reassessment be filed with the

contractors, the employer is faced with the following

CUIAB to appeal the audit determinations and

decisions with respect to state employment tax

assessment?

responsibilities.

Every employer has a right to file a petition for

1. Should the assessment for employment taxes be

reassessment, generally within 30 days after an

paid?

assessment is issued (see the Notice of Assessment

for specific petition rights and procedures). The

Generally, the employer will pay the assessment if

employer may file a petition for reassessment when

he/she agrees with the audit determination. The

he/she disagrees with the Department’s determination

Department recognizes that an audit assessment

that workers are employees or with the amount of the

may represent a large liability which cannot be paid

assessment. A petition is filed with the CUIAB,

immediately. Therefore, the Department will normally

which is an independent body established to hear and

allow the employer to make installment payments to

render decisions on petitions filed. To help the

pay a liability resulting from an assessment. Up to

employer decide whether to file a petition, the

18 months will be allowed, under certain conditions,

Department auditor explains the basis for the audit

by requesting this option. If a longer period is

assessment and the employer’s petition rights. The

needed, the employer may be required to submit

auditor also offers a pre-assessment conference to

additional financial information.

the employer, which is attended by the auditor’s

supervisor. If the reasons for the audit assessment

If the employer disagrees with the determination and

were not explained to the employer, or if the employer

files a petition for reassessment, he/she may decide

wishes to meet and discuss the audit with the auditor

not to pay the assessment until the California

and his/her supervisor, the employer should contact

Unemployment Insurance Appeals Board (CUIAB)

the auditor or his/her supervisor to schedule a

issues a decision on the case. Any decision to delay

conference prior to the expiration of the period for

payment of the assessed liability could ultimately

filing a petition. The final decision to file a petition

increase interest charges.

rests solely with the employer.

If the employer disagrees with the assessment and

3. Should the workers be reported as employees for

files a petition for reassessment, the assessment can

employment tax purposes after the period of the

assessment?

DE 231MW Rev. 2 (1-01) (INTERNET)

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Form De 231mw - Reporting And Payment Following An Assessment For Misclassified Workers

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