2024-23: Is the EDD cracking down on loan out corporations?

Last week, several tax professionals reached out to us concerning communications their clients had received from a chapter of the International Alliance of Theatrical Stage Employees.

Cast & Crew Payroll had been told by the EDD that EDD is refusing to recognize the use of loan out corporations and that the payments to the loan out corporations should have been treated as wages to the loan out corporation owners. Cast & Crew Payroll stated that this will force payroll providers to treat loan out corporation owners in California as employees and pay the loan out corporation owners directly for their services, with full income tax withholding and payment of employee and employer taxes on all income the owners earn.

Since the enactment of AB 5 and its adoption of the ABC worker classification test, there has been a lot of speculation as to the impact of AB 5 on payments to loan out corporations.

We have reached out to the EDD to see if there is any official guidance on this issue and are awaiting a response. We will send a Flash E-mail as soon as we receive additional information from the EDD.

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