Preparing for an Unemployment Tax Audit
To ensure accurate reporting and payment of the proper tax, the Unemployment Tax Section administers a statewide audit program, selecting at random employers for audit during each calendar year. Audits or investigations are also performed as needed to resolve specific issues such as employment questions relating to benefits applicants or public complaints of employer non compliance. At this time, most audits are conducted electronically. Also see the Employer Bill of Rights page. The following is a brief outline of the procedures applicable to most audit situations:
| Scheduling: | Initial audit notification is usually by letter. A pre-audit discussion is held with the employer or designated representative by telephone in advance of the Audit Begin Date to address any questions or concerns about the audit and to enable the auditor to become familiar with the type of business under audit. |
| Audit Time: | Most audits can be completed within 60 – 90 days, depending on the size of business and condition of records. |
| Audit Scope: | Routine audits require initial examination of records for a one-year period, usually the most recently completed calendar year. Discrepancies within this one-year period may require further review up to an additional two years. Records for the audit may be provided in whatever accounting format is normally used by the business, either manual or automated. Such records, however, must reflect clearly the transaction dates, amounts, payees and purpose of the disbursements. |
| Records Required: | At minimum, employers must provide the following:
Note: The unemployment tax section does not audit business income tax returns. It uses income tax returns to verify the business entity and ownership, and to clarify compensation or loans to business principals. |
| Source Documents: | Employers may also need to provide at least one calendar quarter of original source documents such as check stubs with cancelled checks, cash vouchers, or receipts of cash payments, as necessary to verify the accuracy of amounts posted to automated payroll summaries. |
| Audit Closeout: | After the audit work is completed, the auditor will conduct a close-out discussion of the audit findings with the employer or representative, by telephone or, if necessary, in person. An Audit Transmittal Report detailing the audit results is mailed to the employer after a final audit review is concluded. |
| Questions: | Any questions about audit practices should be directed to the appropriate Tax Field Office. |