Since 1990, the California Employment Development Department (EDD) has retained the statutory authority to issue penalties for failure to file Forms W-2 and/or 1099. Until this year, effective January 1, 2018, taxpayers assessed the steepest of those penalties, Unemployment Insurance Code section 13052.5, did not have a right to petition the assessment. However, since enactment of Assembly Bill 1695 on July 24, 2017, and effective January 1, 2018, Section 13052.5 is now petitionable before the California Unemployment Insurance Appeals Board.
In January, 2015, the California Supreme Court granted review of Dynamex Operations West, Inc. v. Superior Court (Lee) (2014) 230 Cal.App.4th 718.
Effective January 1, 2017, employers with 10 or more employees are required to electronically file and pay their EDD employment tax returns, wage reports, and payroll tax deposits. All other employers will be subject to this requirement effective at the start of 2018.
Although it is common practice for corporate officers to take shareholder loans from company coffers, weak or inconsistent recordkeeping can turn this into a serious problem during California payroll tax audits - undocumented loans are often picked up by state tax agencies as unreported "wages." In order to avoid scrutiny, or a possible tax assessment for failure to report wages, businesses must make sure that their shareholder loans are defensible as bona fide loans, and not advances on payments for services rendered, i.e. wages.