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Frequently Asked Questions about Audits

Q.

If I am audited, does it mean I have violated any rules or laws?

A.

No. It means we are checking to make sure you are correctly following Washington State’s Unemployment Insurance rules and laws.


Q.

If I am audited, how many years will you review and what records documents will you need from me?

A.

Typically the audit could expand to three years RCW 50.24.190. However if an auditor finds questionable business practices, the audit may be expanded beyond the three years.

We will send a letter detailing what documents need to be available and the time frame the audit will cover. This letter will also include the pre-scheduled date and time the audit will take place with you or your authorized representative. The following are examples of the type of documents we will be requesting:

  • Payroll and accounting records
  • Employee time records
  • Records showing you own the business
  • Bank records
  • Invoices
  • Annual and quarterly tax records (State and Federal)
  • Check Register
  • General Ledger
  • IRS Form 1099s
  • Financial Statements
  • Business license and registration numbers for subcontractors along with copies of contract agreements and invoices
  • Corporate officer opt-out forms

For more information, link to the video, How to Prepare for an Audit.


Q.

Why do you need to review my check register, general ledger, profit and loss statement, etc. during an audit?

A.

These financial documents are considered accounting records and help us verify reported wages. Every employer is to keep true and accurate business, financial and employment records which are deemed necessary for the effective administration of Unemployment Compensation laws” (RCW 50.12). The law states every employer shall make keep and preserve original records with respect to each worker for four years following the calendar year in which the employment occurred.


Q.

What do auditors look for?

A.

We check to make sure:

For more information, read about working with your ESD tax specialist during an audit.


Q.

What can I do to ensure I am reporting my unemployment taxes properly?

A.

If you are not sure if you have been reporting unemployment taxes properly, you can request a voluntary audit of your business and financial records by calling your tax account management center. If you request a voluntary audit before we notify you of a mandatory audit, we can work with you to potentially minimize any late payment penalty costs.


Q.

What can I expect after the audit?

A.

We will send you a post audit letter that will explain any audit findings. For more information read, what to expect after the audit.


Q.

Are all businesses audited?

A.

We conduct audits on roughly 4,000 Washington employers each year. Approximately 10 percent of our audits are selected randomly through a computer-generated program. We also actively pursue potentially non-compliant businesses for audits in a variety of ways.

  • Compare information shared with other agencies to identify patterns of inconsistent reporting.
  • Receive tips from employers in the same industry who are at competitive disadvantage when similar businesses are not paying their fair share of taxes.
  • Select from industries that historically show a high level of non-compliance.
  • Develop leads from the community and then submit them to our statewide audit coordinator team for consideration.
  • Watch closely for employers that try to avoid higher tax rates through transfer of ownership or reclassification of their business type.

The goal is to ensure that employers report hours and wages correctly and pay the appropriate amount in unemployment taxes.



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