You may be audited for several reasons:

• A former employee applies for unemployment and their reported wages don't match what you reported.
• You may have missed reporting someone as an employee.
• DES finds mistakes on your quarterly tax reports (Form NCUI 101).
• Random selection.

The tax auditor will look at four key areas:

1. Reported wages: If the wages you reported match the actual amounts paid to employees.
2. Calculation: They will make sure if you calculated taxable wages correctly.
3. Payroll: Review different types of pay, like:
   • Casual labor and contract labor
   • Commissions
   • Pay for corporate officers
   • Payments to independent contractors
4. Classification: The auditor will check that your workers were classified correctly.

Yes, sometimes you may pay people you think are independent contractors, but the law may treat them as employees. Be sure to classify your workers correctly to avoid issues.

An audit usually covers one calendar year. However, it can be for up to five years if DES finds issues with your records.

The auditor will check your payroll records, W-2s, 1099s, IRS records, North Carolina Department of Revenue records, and general records like your check journals, invoices, and canceled checks. Depending on your business, they may also look at other records.

The length of the audit depends on the number of employees, the condition of your records, and if any problems are found. Some audits take a few hours, while others may take longer.

Even if you don’t have any employees, DES may still want to audit you to make sure you’re following the rules.

Audits may occur at your main place of business in North Carolina. They also might be at an accountant’s office, a local Division of Workforce Solutions location, or online.

Your accountant does not need to be present unless you want them there to answer questions.

The auditor will discuss the audit findings with you or your designee and mail you the results. You can also find the results in your NCSUITS account.

If you owe taxes but you are unable to pay, DES can work with you to set up a payment agreement.

Your taxes owed to DES are separate from what you might owe the IRS or the North Carolina Department of Revenue. You must contact them to see if you owe additional taxes.

You may protest if you disagree with the audit results. After you get the audit results letter (NCUI-673), you will get a Tax Assessment and Demand for Payment. Follow these steps to protest the auditor’s findings:

1. Write a letter explaining why you think the tax assessment is wrong and include:
   1. The docket or identification number of the result being protested.
   2. The name of the employer.
   3. Each reason for the protest.
   4. The name, official title, and phone number of the person filing the protest.
2. Date and sign the letter (the business owner must sign).
3. Mail the letter with a copy of the tax assessment to the Raleigh address on the letter. You will get more information about a hearing after DES gets your protest. You can also find this information in your NCSUITS account. 

No, the interest will keep adding up until you pay the amount you owe. If you pay the amount DES believes you owe, this will stop the interest. If you win the hearing, any money you pay will be refunded to you.