Frequently Asked Questions About Tax Audits
- Why does the Louisiana Workforce Commission perform audits?
All federal and state taxing agencies perform audits to ensure compliance with their laws. Louisiana Employment Security Law is contained in Louisiana Revised Statutes Title 23, Chapter 11. Section 1661 gives the Louisiana Workforce Commission the right to audit employer records. The department has the power to require employers to allow review of their books.
- Why me?
It may be any of several reasons. Often, it's random. To ensure that the system works well, the department needs to sample employer compliance, often by size and type of firm. A former employee may have filed a claim for unemployment insurance on wages you have not reported or have reported differently. You may not have regarded this person as an employee. We need the facts. Sometimes an employer is suspected of failing to report employees or reporting incorrectly. Again, we need the facts.
- What will the auditor look for?
An auditor confirms that all wages have been reported correctly and that all taxable wages have been computed correctly. The most common types of payroll not reported involve payments for contract labor, commissions, corporate officer's remuneration, and independent contractors.
- What if I paid someone for services who is not on my payroll for something that I don't regard as wages? Can I be charged for these wages?
This is a major area where questions arise. Often, employers pay for what they believe are independent contractors, wages not subject to the law. Later they find out these people are employees and should have been reported. You also may have liability for casual labor, commissions, payment or other remuneration to corporate officers. The auditor will make a finding using clear legal and administrative guidelines.
- How far back will the audit cover?
A normal audit is for one calendar year. If there is an exception, however, the audit may cover three or more calendar years. The auditor will explain the situation to you.
- What records will I need?
Records reviewed include payroll records, W-2s, 1099s, IRS, state Department of Revenue records, and general disbursement records, such as your check record journal, invoices, and canceled checks.
- How long will it take?
It depends on the number of employees, the condition of your records, and any irregularities that are found. Some audits take three to four hours. Others will take longer. The auditor will best be able to answer this question in the detail you need.
- Where will the audit take place?
The audit will occur wherever the records are kept. Often this is the employer's office, but sometimes the records are at an accountant's office. If you prefer, you may bring your records to the auditor's office.
- Should my accountant be present?
That's up to you. It would be wise, if you believe your accountant has a better grasp of your records than you have.
- But what if I don't have any employees?
The department still may want to audit your records to confirm this.
- When can I expect to hear the audit results?
You will get the results when the audit is complete. The auditor will have a close-out with the authorized representative
- What if the department reports that I owe tax, but I can't pay?
You must pay any tax, interest, and penalty due. If you can't pay the entire amount immediately, you usually can arrange a payment schedule with the administrative office.
- Then will I also owe more to the IRS and the Louisiana Department of Revenue?
You need to contact the other agencies to determine if you owe them additional tax.
- What if I don't agree with the auditor's findings?
You may request a hearing. This will be before a neutral hearing officer. From the date of the Notice of Tax Assessment, you have 20 days to request the hearing. Your request must be in writing and state why you believe that notice is unjust or incorrect.
- Does my hearing request stop any further legal action?
Yes. Further legal action will not be taken until the decision is rendered.
- Have additional questions about employment tax audits?
Call your local employment tax office, or (225) 342-2992, or contact the UI Tax Call Center @ 1-833-708-2866.
Equal Opportunity Employer/Program | Auxiliary aids and services are available upon request to individuals with disabilities. This page was last updated on February 22, 2022.
