California Employment Development Department Audit Raises Alarms in Hollywood

The recent audit conducted by the California Employment Development Department (EDD) has caused a stir in Hollywood, particularly among entertainment professionals who rely on loan-out companies for their payments. The audit, initially routine, has now led to concerns regarding the potential invalidation of loan-out structures used by many in the industry. Cast & Crew, a payroll service for the entertainment sector, issued a warning about the EDD's actions, which could impact the ability of workers to deduct certain expenses and result in higher taxes. This move has prompted anxiety among individuals accustomed to this payment method, as it may change the tax implications for their earnings.

One of the primary issues at stake is the classification of workers as independent contractors versus employees, a topic that has gained attention due to California's AB 5 law. The EDD's audit, affecting around 2,000 loan-out companies, focuses on unemployment claims and tax payments related to employment. While the agency has stated that it is not seeking to ban these companies in California, the implications of its actions are significant for the industry at large. Cast & Crew has taken steps to challenge the EDD's assessment, emphasizing the importance of preserving the existing structures that support entertainment industry workers.