EDD Benefit Audit: How I Completed My EDD Audit As a CPABusiness Taxes
In early September 2022, I received an envelope from the California Employment Development Department (EDD) with these words on the front: BENEFIT AUDIT ENCLOSED.
Oh, great — this is just what I needed before the September 15 extended deadline to file all the S corporation returns my firm has to do.
So I opened up the envelope and saw my EDD benefit audit form, along with instructions stating that I must return my audit form (Form DE 1296B) within 10 days — or else!
Before I tell you how I approached my EDD benefit audit, let’s go over some basics.
4 Types of EDD Benefit Audits
There are four different types of EDD benefit audits:
- Quarterly Wage Earnings (Form DE 1296B)
- New Employee Registry Benefit Audit (Form DE1296NER)
- New Hire Benefit Audit (Form DE 1296NBA)
- Interstate Unemployment Insurance Benefit Payment Audit (IB 8605)
By far, the first type of benefit audit — quarterly wage earnings reported on Form DE 1296B — is the most popular, and this is the kind of benefit audit we are focusing on as an example in this article.
What Is the EDD?
The EDD is the California government department that is responsible for paying employment-related state benefits such as:
- Unemployment Insurance (UI)
- Disability Insurance (DI)
- Paid Family Leave (PFL)
This department pays out millions of dollars worth of benefits to California residents every single day.
You heard me — the EDD pays out millions of dollars every single day.
Naturally, the EDD is interested in ensuring that no fraudulent benefit claims are paid out.
And while it can’t prevent all fraud, EDD benefit audits are used to detect potential fraud, particularly in the area of unemployment insurance claims.
What Is an EDD Benefit Audit?
An EDD benefit audit is a process by which the EDD obtains more detailed week-by-week wage information for particular workweeks.
Although employers report their employees’ wages to the state quarterly, benefits are paid out weekly, so the purpose of the EDD benefit audit is to ensure that unemployment insurance benefits were not paid out to an individual who worked a particular week.
What Triggers an EDD Benefit Audit?
An EDD benefit audit may be triggered by inconsistencies in an individual’s unemployment insurance claim or perhaps by some task force targeting employers it suspects of fraud.
However, many EDD benefit audits are completely random, and I believe this is the reason I was sent an EDD benefit audit form to complete for my company.
How to Complete an EDD Benefit Audit
Here’s how to complete an EDD benefit audit, step by step.
Step 1: Ensure the employee’s and and Social Security number indicated in the upper-left corner are correct.
Your EDD benefit audit is pertaining to a particular employee’s — or group of employees’ — wage information.
So the first thing to do with each benefit audit form is confirm that the information about the employee on that form is correct.
So open up your personnel file and confirm its accuracy.
If the information is inaccurate, you will indicate the correct information in Box 4 (more on that later).
Step 2: In the box in the middle of the page, indicate the employee’s earnings by week in the “Gross Earnings” column.
Keep in mind that on each week’s row, you are indicating the amount the employee earned that week, even if they were paid that amount in a different week.
So for example, on my EDD benefit audit form, the first week indicated was the week from February 6, 2022, through February 12, 2022.
This means that I had to go back through my payroll records for this week and examine how many hours my employee worked that week and multiply that amount by her hourly rate to determine the amount I put in this week’s row in the “Gross Earnings” column.
Step 3: Circle the employee’s earnings type or types that were earned in that week.
In the column titled “Circle Earnings Type Below”, you will see eight acronyms, each corresponding to a particular earnings type as described in the table below.
|RE||Regular Earnings (including overtime)|
|O||Other (including Bonuses)|
Step 4: Complete the information about the employee’s work history in Box 3.
In Box 3 on the right-side side, you will see fields for the following information:
- Your employee’s actual first day worked — their state date
- Your employee’s actual last day worked — their termination date
- A box to check if your employee is still employed
- Additional dates and/or reason for separation
In my case, the employee in question was hired on April 30, 2019, and was laid off on February 10, 2022.
So I indicated:
- “4/30/2019” on the “Actual First Day Worked” line
- “2/10/2022” on the “Actual Last Day Worked” line
- “Laid off” on the “Additional dates (i.e., laid off, returned to work) and/or reason for separation” line.
Step 5: Make any corrections to the employee’s name and Social Security number in Box 4.
Remember how in Step 1 I told you to check to see if the employee’s name and Social Security number in the upper-left-hand corner of the benefit audit were correct? Here’s where you can correct it.
If the employee’s name and Social Security number in the upper-left-hand corner of the form are incorrect, indicate the correct information in this box.
If the employee’s name and Social Security number in the upper-left-hand corner of the form are correct, leave this box blank.
In my case, the employee’s information in the upper-left-hand corner was correct, so I left this box blank.
Step 6: Sign, date, and indicate your title and phone number in Box 5.
This is pretty self-explanatory.
Step 7: Mail your completed benefit audit within 10 days.
Once you’re done completing your EDD benefit audit form, mail it to:
Employment Development Department (EDD)
PO Box 3038
Sacramento, CA 95812-3038
As with all documents sent to the government with a deadline, I recommend sending it certified mail with return receipt.
EDD Benefit Audit FAQs
Here are some popular questions employers have about EDD benefit audits.
How can I get help with my EDD benefit audit?
If you need help completing your benefit audit forms, you can call the EDD at 1-866-401-2849 Monday through Friday (except state holidays) from 8:00 AM to 12:00 PM Pacific Time.
What if the employee indicated on the benefit audit form did not work for me at all during the weeks indicated on the form?
If the employee indicated did not work for you during the weeks listed on the form, you do not need to return the form.
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.