The Department of Economic Security conducts routine audits of Arizona employers on a random basis and investigates issues regarding the status of individuals as employees and the designation of payments as wages to ensure proper payment of taxes. You may be contacted by a DES unemployment insurance tax auditor to schedule an appointment to examine your financial records. All DES tax auditors carry state-issued, picture ID cards for official identification. Audits may be conducted at the employer's business, the audit office or you may submit the requested records electronically. At your request, the audit may be conducted at an accountant's office, provided that all necessary records are available there.
Before examining the records, the auditor will interview the owner or representative of the business. The purpose of the interview is to determine the nature of the business, the type of services being performed and to verify the ownership of the business. If the owner designates a third-party representative, the Department will require the completion of a Limited Power of Attorney. This pre-audit interview also helps the tax auditor to better understand the financial records which he or she will be examining.
Financial records are generally examined for the most recently completed calendar year. For instance, if the current date is June 15, 2019, the audit will cover calendar year 2018. Records beyond the audit year may be required if discrepancies in reporting are found. Records for the previous three calendar years as well as the current year may be needed and should be available. More information about how to prepare for an Unemployment Tax audit and your rights as an employer.