Colorado recently issued a flyer about a change in their law that allows a postmark to determine timeliness of quarterly contribution reports. Previously reports had to be received by the due date. It also mentions the increase in the taxable wage from $10,000 to $11,000 for 2012. See the following link for a copy of the flyer.
Employer Tax Sevices CO_Flyer_January_2012.pdf (10.33 KB)
Florida will be issuing their 2012 Unemployment Tax Assessment Notices for Interest on Federal Advances next week. This is the same type of assessment notices issued last year at this time to pay the interest on the state’s federal loan. The amount due will be 0.092% (0.136% in 2011) of taxable payroll for the period July 1, 2010 through June 30, 2011. Payment will be due June 30, 2012.
Employer Tax Services
Arizona sent an apology notice with the 2012 tax rate notices with regard to some incorrect tax statements sent to employers a few weeks ago. See the following link for a copy of the notice.
Employer Tax Services AZ_Flyer_January_2012.pdf (59.42 KB)
Rhode Island issued a flyer regarding unemployment and disability taxable wage bases and tax rates. See the following link for a copy of the flyer.
Employer Tax Services RI_Flyer_December_2011.pdf (54.57 KB)
Pennsylvania recently sent a letter to employers regarding the reduction in FUTA credit on the 2011 Federal Form 940. The letter also mentions the fact that the 2012 rate notices normally mailed on December 31 will be delayed. Our contacts have told us that they do not have a projected mailing date at this time. See the link below for a copy of the letter.
Employer Tax Services
PA_Letter_December_2011.pdf (73.59 KB)
Michigan recently sent a letter to employers regarding the recent law changes and their effect on the 2012 rate determinations. The mailing of the rates will be delayed until the end of January 2012. See the link below for a copy of the letter.
Employer Tax Services MI_Letter_December_2011.pdf (31.02 KB)
Indiana issued a memorandum regarding 2012 unemployment tax rates and other news. Tax rate notices will be issued sometime in January 2012. See the link below for a copy of the memorandum.
Employer Tax Services IN_Memorandum_December_2011.pdf (57.71 KB)
Maryland recently sent a notice to employers about 2012 tax rates. The paper rate notices will be mailed in January but they are offering a telephone number to call and get your 2012 tax rate. See the following link for more information and a copy.
Employer Tax Services
MD_Flyer_December_2011.pdf (66.5 KB)
Vermont recently sent a notice to employers regarding critical information related to the Unemployment Insurance Program. See the following link for a copy.
Employer Tax Services
VT_Flyer_December_2011.pdf (77.92 KB)
New Jersey recently sent a notice to employers regarding important information for calendar year 2012. See the link below for a copy. The flyer mentions the fact that starting with the 2012/2013 fiscal year, employers will no longer receive a paper Notice of Employer Contribution Rate. Those notices will be available in July 2012. Employers will need to establish a Tax Web Enable System (TWES) account. The following link will take you to the website and give you instruction on how to set up your access. http://lwd.dol.state.nj.us/labor/employer/ea/empinfo/TWES.html
NJ_Flyer_December_2011.pdf (61.62 KB)
Employer Tax Services
HR 3346 and S1804 also known as the Emergency Unemployment Compensation Act were introduced by Democrats in both the House and Senate on November 3, 2011. This legislation would prevent over 6 million Americans from losing their unemployment benefits next year by continuing the current Federal unemployment insurance programs through 2012. The bills would also relieve States with Federal unemployment loans from interest charges next year, prevent higher Federal unemployment taxes in January 2012 on employers in insolvent States, and provide a solvency bonus to States without any outstanding loans. We will be tracking this legislation and provide updates as they become available.
California is not imposing a $25 per employee surcharge on employers. A recent LA Times article mistakenly gave that impression. It actually is referring to the increase in FUTA tax that will be due with the fourth quarter FUTA deposit on January 31, 2012. That amount will be 0.3% of the first $7,000 in taxable wages or $21 per employee. Following is a link to the article in question. http://www.latimes.com/business/la-fi-california-unemployment-fund-20111025,0,7242467.story
Employer Tax Services
As of November 1, 2011, the North Carolina Employment Security Commission (ESC) was eliminated. The agency is now called the Division of Employment Security (DES), which falls under the jurisdiction of the Department of Commerce.
The DES is in the process of changing forms and such to reflect the new name and affiliation. At this time, current claims and tax management services that TALX provides to its clients will continue as normal. The DES will keep us apprised if this changes.
The ESC website has been updated to reflect the DES. You may check it out at:
https://www.ncesc.com/default.aspx
The struggling economy has continued to place the Unemployment Insurance (“UI”) system under enormous pressure, and the current economic recovery is proceeding very slowly. This leaves state UI trust funds in a very weakened condition, especially if a new downturn is in the future as some predict.
Economic data continues to indicate that employers should anticipate higher federal and state UI taxes in financial forecasts.
Please see this link http://www.talx.com/News/TaxIntelligence/TI_OCT2011_ETS.pdf for additional information.
On October 9th, 2011 California Governor Jerry Brown signed into law strict employee misclassification legislation. Senate Bill 459, now known as Public Act 706, joins numerous legislative and administrative efforts at the federal and state levels to detect and punish the misclassification of employees as independent contractors.
The law prohibits willful misclassification of individuals as independent contractors, thus avoiding payroll and other tax liabilities. It authorizes an individual to file a complaint and request the Labor Commissioner to issue a determination for violations. It directs the Labor and Workforce Development Agency to assess specified civil penalties and would require the agency to take other specified disciplinary actions against, persons or employers violating these prohibitions. Penalties for violations of the law include monetary assessments ranging from $5000 to $15,000 for each violation.
The law includes an amendment to California Code Section 2753 which subjects third party or non-lawyer consultants to joint liability for knowingly advising an employer to classify a worker later deemed an employee as an independent contractor and requires an offending employer to post a notice on its website for one year containing specific information about its violation of the law. This amendment does not apply to a person who provides advice to his or her employer or an attorney authorized to practice law in California or another United States jurisdiction who provides legal advice in the course of the practice of law.
Rhode Island has announced their taxable wage bases for 2012. As previously reported in our July 11, 2011 Unemployment Flash Report, legislation passed earlier this year sets the taxable wage base at 46.5% of the statewide average annual wage for most employers but $1,500 higher for employer’s assigned the maximum rate. The 2012 taxable wage bases will be $19,600 and $21,100. See the following link for the announcement on the state’s website.
Employer Tax Services
http://www.dlt.ri.gov/ui/2012Taxchanges.htm
Texas issued the following flyer to employers as a reminder to file all unemployment reports and pay all taxes due through the third quarter of 2011 by October 31, 2011, to avoid a negative affect on your 2012 tax rate computation.
Employer Tax Services TX_Important_Tax_Rate_Information.pdf (37.86 KB)
The Massachusetts Department of Unemployment Assistance (DUA) recently revised Form 0590-A, How to File for Unemployment Insurance Benefits. Massachusetts employers are required, under the law, to provide a copy of the notice to all workers who become separated from employment, temporarily or permanently. The form was recently updated, as the DUA has returned to normal hours of operation, Monday through Friday. During the recession, hours had been expanded to include Saturdays.
A copy of the updated Form 0590-A can be found on the DUA website at:
http://www.mass.gov/Elwd/docs/dua/0590a_printversion.pdf
New York has extended deadlines between August 26 and October 31, 2011 to October 31, 2011 for employers in counties in New York State that have been declared federal disaster areas, due to weather related events in August and September of 2011. See the following link for a copy of the notice that was sent to employers for details.
Employer Tax Services NY_Disaster_Relief_Due_Dates.pdf (108.24 KB)
Arizona issued debit statements for the first and second quarters of 2011 on September 17, 2011 to employers that use a third party tax filer and/or file electronically. As reported in previous issues of the Flash Report, specifically issues 4, 5, 11 and 14, and on the TALX blog, employers in Arizona are being charged a Special Assessment (SA) of 0.4% retroactive to the first quarter of 2011. The debit statements detailing the amounts due for the first and second quarters of 2011 will be included in the third quarter, 2011 blank quarterly contribution report (Form UC-018) mailing for those employers that file on the paper form. Payment is due October 31, 2011 and can be made in conjunction with the third quarter payment or separately. See the following link for sample of the debit statement.
Employer Tax Services
AZ_Special_Assessment_Statements.pdf (83.98 KB)
Following is a link to a press release on the South Carolina website regarding the revised rates and how overpayments and refunds will be handled. We have also been informed that some employers assigned a rate in rate class 13-20 will receive another revised rate notice in the near future. This relates to Section 41-31-50(4) that was added to the law with HB 3762. This section states that employers that were credited with more in unemployment tax contributions than benefits charged for the period July 1, 2003 through June 30, 2010 cannot be assigned a rate higher than the Rate Class 12 rate (2.237%). The state was not able to complete the programming needed to identify the employers that fall into this category before the first round of revised rates were issued; therefore, around 2,000 employers will receive a second even lower revised rate. The projected date for issuance of the second round of revised rates has not yet been determined.
Employer Tax Services SC_News_Release.pdf (93.91 KB)
Puerto Rico sent a flyer to their employers regarding a change to their wage detail report effective October 1, 2011. See the following link for a copy of the information.
Employer Tax Services PR_ Flyer.pdf (154.35 KB)
Arizona to issue debit statements for the first and second quarters of 2011 starting September 20, 2011. As reported in previous issues of the Flash Report, specifically issues 4, 5 and 11, and on the TALX blog, employers in Arizona are being charged a Special Assessment (SA) of 0.4% retroactive to the first quarter of 2011. The debit statements detailing the amounts due for the first and second quarters of 2011 will be included in the third quarter, 2011 blank quarterly contribution report (Form UC-18) mailing. Payment is due October 31, 2011 and can be made in conjunction with the third quarter payment or separately.
Employer Tax Services
New Mexico’s legislature, in their current special session has introduced three bills focused on keeping the unemployment trust fund solvent. HB31 backed by republican governor Susanna Marrtinez keeps the rate schedule at the current one (Schedule 1) for 2012 and 2013 and appropriates $65 million dollars each year from the state’s general fund to the unemployment fund. The other two bills backed by democrats in the house and senate, propose rate schedule increases. HB19 proposes Schedule 3 for 2012 and SB29 proposes Schedule 2 for 2012 and 2013. We will be watching the progress of this legislation and will provide updates as they become available.
Employer Tax Services
South Carolina has announced that the revised rate schedule published August 5, 2011 will be the final schedule. They are projecting a September 22, 2011 mail date for the revised rate notices. See the following link for a copy of the schedule published on August 5, 2011.
Employer Tax Services SC_Revised_Rate_Schedule.pdf (52.38 KB)
Kentucky’s governor has authorized payment of the $28.2 million interest due on the state’s Title XII federal loan to be made with $9.8 million coming from the interest and penalty fund and the other $18.4 million via a loan from the state’s general funds. The governor has tasked the General Assembly with finding a permanent solution to the interest issue for future payments.
Employer Tax Services
Kentucky recently sent a notice to employers regarding law changes that will be effective January 1, 2012. It also confirms that Kentucky employers will incur a 0.3% FUTA credit reduction on the 2011 Federal Form 940. See the following link for a copy of the flyer.
Employer Tax Services KY_Flyer.pdf (48.38 KB)
Idaho has repaid the federal government $202.4 million the state borrowed in 2009 and 2010. The link below is the state's press release.
Employer Tax Services
ID_Press_Release.pdf (52.73 KB)
Iowa Workforce Development announced that employers will see approximately $96 million dollars in tax savings for 2012 by moving from table 3 to table 4. See the link below for more information in the official news release.
Employer Tax Services IA_News_Release.pdf (35.64 KB)
New Hampshire has sent notices to employers reminding them of their obligation to report all new hires within 20 days after they are hired. See the link below for a copy of the information.
Employer Tax Services NH_NewHire_Flyer.pdf (382.74 KB)
Alabama has mailed their 2011 Federal Loan interest assessment bills. The amount due will be 0.07% of taxable payroll for the calendar year 2010. Payment is due September 9, 2011. See the link below for a sample of the statement.
Emplpoyer Tax Services
AL_Interest_Assessment.pdf (54.13 KB)
South Carolina has issued a notice to all employers with regard to the information we reported in our July 11, 2011 Unemployment Flash Report. See the link below for a copy of the notice. The rate schedule shown is a preliminary estimate. Actual revised rate notices will be sent at a later date. All but Rate Class 1 employers should see a significant decrease in their 2011 assigned tax rate. We will publish additional information as it becomes available.
Employer Tax Services
SC_Revised_Rate_Schedule.pdf (52.38 KB)
Wisconsin has mailed their 2011 Federal Loan interest assessment bills. The amount due will be 0.2249% of taxable payroll for calendar year 2010 for tax paying employers and 0.1687% for reimbursing employers and Indian tribes. Payment is due September 9, 2011. Employers with calendar year 2010 taxable payroll of less than or equal to $25,000 are exempt from the assessment. See the following link for a sample of the statement.
Employer Tax Services
WI_Interest_Assessmemt.pdf (92.74 KB)
Vermont’s governor has authorized the 2011 interest payment on the state’s federal loan to be made out of state General Funds. Employers will not be responsible for any additional tax at this time.
Employer Tax Services
Kentucky is still undecided as to how their federal loan interest payment due September 30, 2011 will be made. According to information published by the Kentucky Chamber of Commerce and the Kentucky Retail Federation there is a meeting scheduled for early in the week of August 8, 2011 between the governor, his key staff, these and other business groups to discuss how to address this issue. Senate President David Williams has also called on the governor to call a special session of the General Assembly to deal with the issue. Additional information will be provided as it becomes available.
Employer Tax Services
Georgia is still undecided as to how their federal loan interest payment due, September 30, 2011, will be made. Contacts to the agency have been unsuccessful in obtaining any information.
Employer Tax Services
Arizona tax rates for some employers will be changing effective July 1, 2011. As a result of the reduced federal unemployment tax rate effective July 1, 2011, employers that were exempt from the 0.1% Job Training Tax (JTT) will be required to pay it effective with the third quarter, 2011 quarterly returns. Any JTT exemptions prior to July 1, 2011 are unaffected. Therefore, tax-rated employers who were not subject to the JTT during Quarters 1 and 2 of 2011 will pay the surcharge due on those quarters at a rate of 0.40% (includes only the 0.40% HB2619 Special Assessment). All tax-rated employers will pay the surcharge due on quarters 3 and 4 of 2011 at a rate of 0.50% (this includes the 0.40% HB 2619 Special Assessment plus the 0.10% JTT). A newsletter that explains the FUTA tax rate/Job Training Tax change will be enclosed with the Quarter 3 UC-018 mailing which will be mailed out in batches from mid to late September 2011.
Employer Tax Services
Wisconsin will be mailing their 2011 Federal Loan Interest Assessment bills starting August 3rd with a mail date of August 10, 2011. The amount due will be 0.2249% of taxable payroll for calendar year 2010 for tax paying employers and 0.1687% for reimbursing employers and Indian tribes. Payment is due September 9, 2011. Employers with calendar year 2010 taxable payroll of less than or equal to $25,000 are exempt from the assessment.
Employer Tax Services
In 2011, employers have faced numerous increases in unemployment costs and this will continue through 2012 and beyond as states work toward paying back Title XII loans and rebuilding trust fund balances. In planning for unemployment taxes, employers often fail to evaluate all tax planning strategies which may reduce unemployment tax liabilities. A joint account (also referred to as a common rate group) is a tax planning solution offered in a number of states and should be reviewed annually by any business with two or more employers operating in an eligible state.
For additional information, please visit:
http://www.talx.com/News/TaxIntelligence/TI_JULY2011_ETS.pdf
Delaware has sent notices to employers formally announcing that as previously reported here, there will be no “Temporary Emergency Employer Assessment” this year. See the link below for a copy of the notice.
Employer Tax Services DE_TEEA_Letter.pdf (49.44 KB)
Colorado has mailed their 2011 Federal Loan Interest Assessment bills. The percentage that will be multiplied by the fourth quarter 2010 gross payroll to determine each employer’s assessment amount is 0.1021%. Payment is due 30 days from the mail date. Employers with no benefit charges against their account, a positive reserve ratio of at least 7% or have selected the reimbursing method are exempt from the assessment.
Employer Tax Services
Alabama will be mailing their 2011 Federal Loan Interest Assessment bills starting August 8th with a mail date of August 10, 2011. The amount due will be 0.07% of taxable payroll for the calendar year 2010. Payment is due September 9, 2011.
Employer Tax Services
Wisconsin will be mailing their 2011 Federal Loan Interest Assessment bills in batches beginning August 5, 2001 and expect to have them all mailed by August 10, 2011. The percentages are still an estimate and will not be final until the job is run on August 2, 2011. At this point they are projecting the percentage for contributory employers to be 0.2063% and 0.1547% for reimbursing employers. The percentage will be multiplied by the 2010 calendar year taxable payroll to get the amount due. Payments will be due September 9, 2011.
Employer Tax Services
Connecticut has mailed their 2011 Federal Loan Interest Assessment bills with a mailing date of August 1, 2011. The amount due is 0.17% of taxable payroll for the fiscal year ending June 30, 2010. Payment will be due August 31, 2011. See the link below for a sample of the statement.
Employer Tax Services CT_Interest_Assessment.pdf (63.39 KB)
Colorado is projecting their 2011 Federal Loan Interest Assessment bills will be mailed on August 1, 2011. They are still working on the calculation of the percentage that will be multiplied by the fourth quarter 2010 gross payroll to determine each employer’s assessment amount. They were unable to even give us an estimate at this time. Employers with no benefit charges against their account, a positive reserve ratio of at least 7% or have selected the reimbursing method are exempt from the assessment.
Employer Tax Services
Alabama is projecting their 2011 Federal Loan Interest Assessment bills will be mailed in early August 2011. The amount due is estimated to be between 0.07% and 0.1% of taxable payroll for calendar year 2010. Payment will be due 30 days after the date of the bill.
Employer Tax Services
New York has mailed their 2011 Federal Loan Interest Assessment bills. The amount due is 0.25% of employer taxable payroll for fiscal year ending September 30, 2010. Payment is due August 15, 2011. See the link below for a sample of the statement.
Employer Tax Services NY_Interest_Assessment.pdf (106.18 KB)
South Carolina’s budget has finally been approved. Legislators appropriated approximately $146 million dollars to be deposited directly into the state’s unemployment trust fund. This additional money will allow the agency to recalculate and reduce 2011 tax rates for all employers retroactively to January 1, 2011. With this deposit the agency also expects to make a Title XII loan payment large enough to qualify for a credit reduction exemption in 2011. If the payment is made by November 10, 2011 and the USDOL approves, the FUTA effective rate would be 0.8% for the first half and 0.6% for the second half of 2011. The money is not scheduled to be deposited in the trust fund until sometime in September. The bad news is the agency will not be able to issue revised rate notices or credits for first and second quarter overpayments until after the money is actually deposited. Employers will have to pay second quarter at their originally assigned rate. The agency hopes to have new rates and credits issued in time for them to be used when filing third and fourth quarter returns. We will publish more information as it becomes available.
Employer Tax Services
Rhode Island H5894 was enacted. This legislation changes the taxable wage base beginning in 2012 to 46.5% of the average annual wage; however, it also provides that the taxable wage base for employers with a reserve account percentage of negative 24% or less will be $1,500 higher than that for all other employers.
Employer Tax Services
Ohio legislators approved a budget that included the creation of an Unemployment Compensation Contingency Fund for the payment of interest on the state’s federal Title XII loan. The legislature also appropriated a little more than $100 million in funds to this account. Employers will not be responsible to pay any additional tax to pay interest this year.
Employer Tax Services
Minnesota's state government has been shutdown, due to a budget impasse between the governor and lawmakers. The Unemployment Insurance (UI) Program of the Minnesota Department of Employment and Economic Development (DEED) is considered a "critical/essential" service, so it is not included in the shutdown. The agency is open during the state government shutdown; however, they anticipate a significant increase in new claim filings. In order to manage the increased volume, the agency has implemented a schedule for persons filing new benefit claims/applications. Details about claim filings during the shutdown can be found at: ttp://www.uimn.org/ui/shutdown/open_for_business.html and http://www.uimn.org/ui/shutdown/index.html
FL HB 7005 was enacted. This bill contains both unemployment benefits and tax provisions. Law changes on the benefits side include: 1) reducing maximum benefit weeks from 26 to 23 weeks; 2) redefining the term "misconduct"; 3) making severance pay disqualifying/deductible from unemployment benefits; 4) allowing hearsay evidence at unemployment hearings under certain conditions; and 5) modifying the look-back period to trigger on state extended benefits from 2 years to 3 years. Law changes on the tax side include: 1) retaining the contribution installment payment option through 2014; and 2) decreasing by 10% the benefit charges, through the first quarter of 2011, used in employer’s 2012 and 2013 rate calculations and coupled with previous legislation that increased the 2010 and 2011 taxable payroll used in those same rate calculations by approximately 20%, employer’s benefit ratios will be significantly lower than they normally would have been. This is good news; however, legislation passed in 2009 and delayed in 2010 will kick in with an increase in the taxable wage base to $8,500 in 2012 and an increase in the factors used to calculate employer tax rates. Overall, employers can still expect to see a large increase in their 2012 tax cost over 2011.
Employer Tax Services
The FUTA 0.2% surtax is set to expire on June 30, 2011. The permanent gross FUTA tax rate is 6.0%. The 0.2% surtax was added in 1976 to repay federal loans to states and later extended to increase reserves in the federal unemployment account to cover future loans. With the 0.2% surtax the net FUTA tax employers pay after taking credit for up to 5.4% of state unemployment taxes is 0.8%. Under current law the surtax will expire June 30, 2011; therefore, the net FUTA rate will be reduced to 0.6% on the FUTA taxable wages as of July 1, 2011. At this time, according to Ways and Means Select Revenue Measures Subcommittee Chairman Pat Tiberi (R-OH) Congress is not planning to extend the surtax. Senator Orrin Hatch (R-UT), ranking member of the Senate Committee on Finance, said he supports allowing the surtax to expire and has not heard of any plans within the committee to approve an extension. We are also hearing from sources at UWC and others that the surtax could still be extended after June 30th in the form of a year end tax extender bill or as an outcome of the negotiations being lead by Vice President Biden with members of the House and Senate over the increase in the debt ceiling that has to occur by August 1, 2011. It is therefore our recommendation that employers continue to accrue FUTA tax at a rate of 0.8% until it is time to make the third quarter FUTA deposit in October. Updates will follow as information becomes available.
Employer Tax Services
Missouri federal Title XII loan interest assessment has been set at 0.0931895% of calendar year 2010 taxable payroll. The amount due will be reflected on the second quarter, 2011 contribution report. Payment is due by July 31, 2011 along with the regular unemployment contributions.
Employer Tax Services
Federal Interest Repayment
Colorado employers pay premiums into the Colorado Unemployment Insurance Trust Fund to pay for unemployment benefits. The recent economic downturn caused an unprecedented demand for unemployment benefitss in Colorado and across the country. In January 2010, they joined other states in borrowing money from the federal government so that they could continue to pay unemployment benefits from the states's Unemployment Insurance Trust Fund.
Unless Congress acts, by law, certain experience-rated employers must make an annual interest payment on borrowed money from the federal government. All active, experienced rated employers must share in the repayment of the federal loan interest except:
- State Government
- Political Subdibisions
- Employers with Benefits-charged account balance of zero
- Employers with percent-of-excess greater than or equal to +7
- Reimbursing employers
To calculate the Trust Fund Assessment rate, they will determine the total gross wages of all liable experienced rated employers for the second quarter of the previous year (amount A). Then they will determine the sum of the annual interest on the loan and the administrative costs during the interest-repayment period (amount B). They divide amount A into amount B to the the TFA rate.
To determine what the employer will pay, they will multiply the employer's gross wages from the fourth quarter of the previous year by the TFA rate.
The first payment to the Federal government is interst for January 2011 through April 2011. In early July 2011, they will send bills titled Unemployment Insurance Notice of Trust Fund Assessment; payments must be received 30 days from the bill date. Employers can send a check or money order payable to the Colorado State Treasurer. Employers must be sure to put their unemployment account number on the payment and return the TFA billing statement with their payment.
If an employer has any outstanding amounts due on their account, payments will be applied in the following order, as applicable:
- Trust Fund Assessment
- Premium Penalities
- Premium Interest
- Premiums
Legislation introduced in Congress is contributing to uncertainty concerning how federal (FUTA) and state (SUI) unemployment tax costs will be impacted in 2011 and in the years to come. Both parties have expressed concern over the imposition of the following costs on employers as they are seen as impediments to the fledgling employment recovery:
FUTA credit reductions – FUTA credit reductions due to unpaid Title XII loans which increase FUTA taxes are likely to occur in 24 states in 2011.
Title XII interest assessments – Interest on these loans was suspended in 2009-2010 by the provisions of the American Recovery and Reinvestment Act. However, because those provisions were not extended, the 29 states with outstanding Title XII loans due to insolvent state unemployment trust funds are now assessing employers or finding other means to pay the interest which is due by September 30, 2011.
For additional information about the approaches being considered in Congress, please see the Tax Intelligence titled “2011 Federal Unemployment Insurance Tax Cost Uncertainty” at the following link:
http://www.talx.com/News/TaxIntelligence/TI_MAY2011_FEDERAL_UI_TAX_COST_UNCERTAINTY_ETS.pdf
Colorado Unemployment Insurance Trust Fund Assessment Billing Statements to be sent in July 2011. The state recently sent a flyer to employers that will be required to make a payment this year. It explains how Colorado will assess employers to pay interest on their outstanding Title XII federal loan. See the link below for a copy of the flyer. Employers that elect the reimbursing method of financing and merit rated employers that have had zero benefit charges against their account or have a positive reserve ratio of 7% or more are exempt from this assessment.
Employer Tax Services CO_Flyer.pdf (61.95 KB)
Situation
The Disaster Declaration in Missouri has been amended to add ten additional counties, because of continued catastrophic weather, including the city of Joplin in Jasper County.
The counties now covered under the Disaster Declaration are: Butler, Cape Girardeau, Howell, Jasper, McDonald, Mississippi, New Madrid, Newton, Pulaski, Ripley, Scott, St. Louis, Stoddard, Stone and Taney.
Disaster Unemployment Assistance (DUA) is available for workers impacted by severe storms, tornadoes and flooding. Individuals in Butler, Mississippi, New Madrid, St. Louis and Taney counties must file a DUA claim no later than June 16, 2011. Those in Cape
Girardeau, Howell, Jasper, McDonald, Newton, Pulaski, Ripley, Scott, Stoddard, and Stone counties must file no later than June 22, 2011.
Information on Applying for DUA
Persons must file a DUA claim by calling one of the Regional Claims Centers listed below, Monday through Friday between 8:00 a.m. - 5:00 p.m. Regional Claims Centers: Jefferson City - 573-751-9040; Kansas City - 816-889-3101; St. Louis -314-340-4950; Springfield - 417-895-6851; Outside Local Calling Area - 800-320-2519
For filing purposes, persons will need to provide their Social Security Number and the name and address of their last employer or prospective employer. A copy of the most recent federal income tax forms or check stubs may also be required. Proof of employment must be filed with the initial claim or provided within 21 days of filing a DUA claim.
Application eligibility criteria include persons who:
· can no longer work or perform services because of physical damage or destruction to the place of employment as a direct result of a disaster; or
· cannot perform work or self-employment because of an injury caused as a direct result of the disaster; or
· became the breadwinner or major support of a household because of the death of the head of the household; or
· cannot work or perform self-employment due to closure of a facility by the federal government.
Benefit eligibility criteria for DUA stipulates individuals:
· must be an unemployed or self-unemployed worker whose unemployment was caused as a direct result of the major disaster declared by the President;
· must be a U.S. national or a qualified alien; and
· must not qualify for regular UI benefits from any state;
Workers needing additional assistance regarding DUA may call toll-free 800-788-4002 or go to http://www.labor.mo.gov/ and click on “Disaster Unemployment Assistance.”
What You Need to Know about the DUA Program and the UI Program
Persons are eligible for DUA only if they do not first qualify for benefits under the regular state Unemployment Insurance (UI) program or exhaust regular benefits. If a person is unemployed due to a disaster and qualifies under the state UI program, benefits will be paid under the regular program first. State UI laws vary regarding non-charging for merit-rated employers when benefits are paid under the regular program for disaster separations.
Missouri laws do not have relief of charge provisions for benefits paid under the regular state UI program when the unemployment is due directly to a major natural disaster, as declared by the President. DUA is funded entirely by the federal government. Unlike regular state UI benefits, DUA funds are federally appropriated. DUA benefits are allocated from the President’s Disaster Relief Fund, so no employer is liable for benefits paid under the DUA program. FEMA (Federal Emergency Management Agency) transfers funds to the U.S. Department of Labor to use in states with designated major disaster areas that have Presidential Disaster Declarations.
Kansas SB 77 was enacted. This legislation keeps the current rate schedule in effect for 2012 through 2014 for employers in rate groups 1 to 33 which comprise all positive balanced employers. The maximum rate for these groups will remain 5.4%. On the other hand it creates an increased surcharge on negative balanced employers ranging from 0.1% up to 2.0% to pay the interest and principal on the state’s outstanding Title XII federal loan. This change increases the maximum rate from 7.4% to 9.4% for this group of employers for at least 2012 through 2014.
Employer Tax Services
South Carolina introduces HB 4198. After wrangling with many different scenarios over the past several months representative Kenneth Bingham introduced the bill on May 11, 2011. This legislation is in response to objections from employers and various business organizations to the large increase in employer unemployment costs for 2011 that were the result of the change in employer rate calculations and the increase in taxable wage base coupled with the increase in FUTA cost. The most significant part of the legislation reduces base rates retroactively to January 1, 2011 for employers in rate classes 13-20 by 32% but keeps rates for rate classes 1-12 the same. It also provides a credit for 2011 and 2012 to employers in rate classes 1-12 to offset the increased FUTA cost, but also imposes a surcharge on employers in rate classes 13-20 to cover credits given to rate classes 1-12.
Employer Tax Services
Arkansas probably will not issue bonds. In a previous issue of the TALX Unemployment Flash Report we reported on SB 305 which authorizes the Arkansas Development Finance Authority, subject to approval of voters in a statewide election, to issue bonds to pay back the federal Title XII loan. In a recent presentation made by Arkansas Chamber of Commerce president, Randy Zook, he told the group that new projections on the state’s $240 million debt suggest that a bond issue won’t save the state or employer’s enough money to pursue. The new calculations produced by the Arkansas Department of Workforce Services and released by the Arkansas Chamber of Commerce also show that under reforms made in the last legislative session combined with improving economic conditions, Arkansas could be debt-free by 2015.
Employer Tax Services
Arizona Special Assessment (SA); additional information has been provided by the Arizona Department of Employment Security. The SA was created in HB 2619 as mentioned in our last issue of the TALX Unemployment Flash Report. The Tax Section of the DES Unemployment Insurance Administration is responsible for collecting the Special Assessment (SA) at a rate determined by the DES director. The rates are currently projected to be 0.40% for 2011 and 0.60% for 2012, but the final decision on the rates has not yet been made. The amount due for the first three quarters of 2011 is payable by October 31, 2011. In September 2011, DES will mail employers statements of the SA amounts they owe, if any, for the first two quarters of 2011. Beginning with the third quarter of 2011, SA amounts are payable with quarterly UI taxes and the combined amount of SA and Job Training Tax (if Job Training Tax is also applicable) will be reported on Line 7, Section C of the Unemployment Tax and Wage Report (form UC-018). Employers may include SA amounts due for the first two quarters of 2011 on the report for the third quarter of 2011 and remit a single payment covering the total amount of SA due for the first three quarters plus UI Tax and Job Training Tax due for the third quarter. Alternatively, they may pay the SA due for the first two quarters separately from the third quarter, either electronically via the online Tax and Wage System (TWS) at http://www.azuitax.com/ or by check or money order mailed to the regular quarterly report and payment mailing address. DES will be sending a newsletter to all employers in July detailing all of the information about this new requirement.
Employer Tax Services
In the wake of the Great Recession, the number of unemployment insurance (UI)claimants in many states has remained very high, straining the funding of state UI programs. The National Association of Workforce Agencies (NASWA) has recently completed its second annual survey of states on their unemployment insurance taxes. Following is a link to the results of the survey.
Employer Tax Services
The Michigan Chamber Foundation this week released a major nonpartisan, economic study identifying up to $550 million in cost-saving reformsto Michigan’s bankrupt unemployment insurance system (UI).The study identifies strong and bold policy options to make Michigan more competitive and offset the need for additional employer taxes to pay down the nearly $4 billion Michigan owes to the federal government for its employer-financed UI system. Following is a link to the full study.
Employer Tax Services
Nevada AJR 9 was enacted. This joint resolution urges the United States Congress to enact the Unemployment Insurance Solvency Act of 2011. This act was introduced by Congress to offer fiscal relief to the states that have borrowed money from the Federal Government for the payment of unemployment benefits.
Employer Tax Services
Arizona HB 2619 was enacted. This legislation establishes a special assessment for 2011 and 2012 to pay interest and principal on the state’s outstanding Title XII federal loan. The intent is to pay off the loan by November 10, 2012. The assessment percentage will be set by the Director but is not intended to exceed 0.4% of taxable wages for 2011. The assessment will be paid quarterly with regular unemployment contributions starting with the third quarter 2011. Amounts due for first and second quarter will be due with third quarter. It has not yet been determined by the state how employers will be notified of the amount due for first and second quarter. We will provide additional information as it becomes available.
Employer Tax Services
Senate Joint Memorial 8008 was enacted. This joint memorial requests the US Department of Labor to provide federal unemployment tax relief to WA state employers and a financial benefit to the state’s unemployment insurance trust fund equal to any benefit provided to states that borrowed form the federal unemployment account because the WA state unemployment insurance trust fund has remained solvent throughout the recession.
Employer Tax Services
The following Tax Alert was sent to all of our Florida clients this afternoon. It references some issues with waiting until the last day to electronically file your unemployment quarterly reports and payments.
FL Tax Alert April 2011 (PDF, 69.48 KB)
Employer Tax Services
California has indicated that they will be borrowing from the Disability Fund to pay the 2011 interest on their Title XII federal loan; therefore, employers do not have to budget for any additional cost at this time.
Missouri Title XII Interest Assessment has been estimated at $19.52 per employee. The actual amount of the assessment will be shown on the second quarter 2011 Contribution and Wage Report, or will be indicated when filing electronically using USTAR; the state’s on-line system for employers.
Employer Tax Services
Michigan has recently issued their winter 2011 issue of the “Michigan Employer Advisor”. The first page references the fact that applying for the Michigan Tax Credit is just a click away. The tax credit will be available again this year to qualifying employers to ease the burden on employers that pay an additional federal unemployment tax due to the borrowing from the federal government to pay unemployment benefits. The following link will take you to the issue. http://www.michigan.gov/documents/uia_advisor_90020_7.pdf
Employer Tax Services
Arkansas SB 305 was enacted. This legislation authorizes the Arkansas Development Finance Authority, subject to approval of voters in a statewide election, to issue bonds to pay back the federal Title XII loan. The election will be called by proclamation of the Governor. Bonds will be repaid from an unemployment obligation assessment imposed on employers. The effective date of the assessment is the first day of the calendar quarter immediately following the month in which the Secretary of State certifies voter approval. The assessment amount is dependent on the amount of bonds issued and will be 25%, 30%, 33.5% or 37.5% of the employer’s basic unemployment rate in effect on the date the Governor issues the proclamation calling an election.
Employer Tax Services
Illinois HB 1030 was enacted. This legislation creates a 0.5% surcharge for the first quarter 2011 by diverting 0.5% of all employers' contributions to the Title XII Interest Fund. The money in this fund will be used to pay the interest on the state's Title XII loan that is due on September 30, 2011. It also sets the 2012 taxable wage base at $13,560, which is $600 dollars higher than it would have been under the current law. This increase is intended to help recoup the money lost in 2011 to the unemployment trust fund as a result of the diversion to the Title XII Interest Fund.
Employer Tax Services
The unemployment rate fell to a two-year low of 8.8 percent in March, capping the strongest two months of hiring since before the recession began.
Governor Kitzhaber Extends Unemployment Benefits
(SALEM, Ore.) — Governor Kitzhaber today signed two pieces of legislation that will extend unemployment benefits up to 26 weeks for Oregonians who have exhausted all other options.
“Although we are on the path to economic recovery, there are thousands of Oregonians who are still struggling,” said Governor Kitzhaber. “Extending unemployment benefits is a life line to people in need right now.”
Senate Bill 637, passed with overwhelming support, allows Oregon to use $225 million in federal funds to extend unemployment benefits for 20 weeks. Nearly 50,000 Oregonians will be eligible to receive the additional benefits by the end of the year.
Senate Bill 638 will use $26 million from State Unemployment Trust Fund to extend benefits for six weeks. This money will go to an estimated 17,500 Oregon workers whose benefits would otherwise expire in April. Oregon Press Release SB 637.pdf (35.15 KB)
The bill amends the trigger for state extended benefits (EB), providing an option for a three-year look back period of unemployment rates instead of a two-year look back. What this means is that unemployed persons can continue collecting state extended benefits after regular UI benefits and federal EUC is exhausted. For state UI agencies and employers (private sector and non-profit), it means they can continue to take advantage of the 100% federal funding of state EB that is in place through the end of 2011.
New York Unemployment Extension.pdf (20.7 KB)
North Carolina SB 99 Reforms the UI Tax Structure/Expedite Analysis. An act to expedite the analysis of the tax structure for unemployment insurance in North Carolina given the substantial negative balance in the state's unemployment insurance trust fund and the substantial federal loan balance owed by the state for payment of unemployment insurance benefits.
http://www.ncga.state.nc.us/Sessions/2011/Bills/Senate/HTML/S99v1.html
Acccording to the U.S. Bureau of Labor statistics as of April 1st Michigan would no longer meet the criteria to remain in the extended benefits program. As a result HB 4408 was signed by Governor Snyder to ensure the program stays strong for those who need it.
This bill provides up to 20 weeks (reduced from 26 weeks) of unemployment payments to those who exhaust their state and Emergency Unemployment compensation benefits. By reducing the number of weeks from 26 to 20 the long term saving will help reduce the burden on taxpayers and job creators. Michigan Press Release HB 4408.pdf (105.79 KB)
PA has been trying to unveil the Employer Tax Services portion of their system redesign, known as Unemployment Compensation Management System (UCMS). They had originally slated 1st quarter tax and wage reports, due April 30, 2011, to be filed electronically, and the agency would no longer mail paper quarterly report forms.
The agency's UI newsletter for Spring 2011 says UCMS - Employer Tax Services is not available yet, so the mandatory electronic filing is being pushed back. (Attached is a copy of the Spring 2011 newsletter page and a copy of a communication the agency sent to employers about the UCMS in October 2010.)
PA Bulletin.pdf (494.08 KB)
Idaho HB 108 was enacted. This legislation adds to and amends existing law relating to Employment Security Law to allow the Department of Labor to issue bonds to repay advances from the federal Unemployment Insurance Trust Fund.
- South Dakota SB 86 was enacted. It decreases the maximum investment fee rate assigned to experience rated employers from 0.55% to 0.53%. The 2011 tax rate notices were issued March 17, 2011.
- South Dakota SB 125 was enacted. It changes the computation date for annual rate calculations from December 31st of the previous year to June 30th of the previous year. As a result, employers will receive future rate notices before the calendar year starts, rather than after it starts as is now the case. The state anticipates the rate notices for 2012 to be issued no later than November 2011.
Employer Tax Services
The attached information was sent to our employers today. We at TALX Corporation strive to keep our clients up to date on all issues that could affect the total unemployment taxes they pay. The attached Unemployment Flash Report is our latest vehicle for accomplishing that goal. This publication will be sent generally every two weeks as information becomes available.
Please reply to taxalerts@talx.com with any questions, comments or suggestions.
Thank you,
Employer Tax Services Unemployment_Bulletin_03.21.11.pdf (580.29 KB)
The following mailer from the state of Delaware is concerning the Temporary Emergency Employer Assessment to pay interest on UI Trust Fund Loans (Title XII loans). This was e-mailed to all our DE clients earlier this week.DE Mailer March 2011.pdf (58.9 KB)
2011 Taxable Wage Bases
A "taxable wage base" is the annual amount of wages paid by an employer to an employee that are subjected to certain payroll taxes. There are three primary employment taxes which are impacted by a wage limit – FICA, FUTA and state unemployment (SUI) tax. State unemployment taxes are employer-paid taxes and the amount of wages subject to tax varies by state. Employers must consider wage base changes as they budget for 2011 employment tax costs.
The following listing of the actual SUI wage bases for 2011 was sent to our employers this week. December 2010 Tax Intelligence (PDF 67.99 KB)
TALX recently held a webcast regarding the employment tax impacts of mergers and acquisitions. By understanding the complex nature of compliance requirements and planning strategies available, employers have the opportunity to minimize tax liability and payroll tax risk associated with potential noncompliance exposures at the federal, state and local levels.
The attached information is a summary of this event, for a link to the archive for a replay of this event please contact Pete Krieshok at 314-214-7325 or pkrieshok@talx.com. October 2010 Webcast.pdf (214.41 KB)
Due to the unprecedented burden placed on the unemployment system , states have depleted unemployment trust funds and as of August 12, 2010, thirty-two (32) states (including the Virgin Islands) are currently taking Title XII loans from the federal government to pay unemployment benefits. As a result, states are looking to increase tax revenues through legislative actions, mandatory increases already built into tax statutes and aggressive collections efforts.
However, there are certain unemployment tax planning strategies that can be utilized which may have a substantial impact on unemployment tax rate reductions. A voluntary contribution is a tax technique that should be reviewed annually for tax savings opportunity. The attached Tax Intelligence was recently sent to our employers.
Tax Intelligence August 2010.pdf (384.78 KB)
Several months ago, the US DOL proposed changes to the Final Rules on Title XII Cash Flow Interest Free Borrowing. These rule changes were finalized on September 17, 2010.
The significance of the new regulation is that “cash flow loans”, interest free Title XII loans to state UI trust funds, are going to be harder to get in the future. Prior to this ruling, if an agency borrowed under Title XII, no interest was due if the borrowing occurred after January 1st of a calendar year and the loan was repaid by September 30 in the same year and the agency avoided further borrowing through the balance of the rest of the same calendar year.
With the new ruling, beginning in 2014, a state applying for a Title XII advance will have to demonstrate that trust fund reserves were at least at the 0.50 AHCM level in one of the past five years prior to applying for the advance. This standard will increase in 0.10 increments each year until the required AHCM level reaches 1.0 in 2019. Second, the state will have to demonstrate that no reduction in taxation effort occurred during the period that the AHCM was met and the date of the request.
Not stated in the regulation, however, is a third important change. You will recall that AHCM or Average High Cost Multiple is essentially a measure of UI trust reserves equal to a one year payout of benefits based upon the average yearly payout of the last three most severe recessions in the past 20 years. Up until this recession, that level of funding had remained fairly constant. When this recession is officially declared over, it will replace one of the three in the current average. In other words, a AHCM of 0.50 – 1.0 will be much more in 2014 than those same values in 2008.
The average AHCM for the US, reported in the Q3/2009 USDOL UI Data Summary was 0.40. Since then, the agency has not reported a AHCM value as Title XII advances have exceeded net total cash reserves in state UI trust funds since Q4/2009. The AHCM value for the US was 0.52 at the onset of the present recession.
The action taken by the agency is in line with the report issued by the GAO in May, 2010. That report indicated that UI financing at the state level was directly responsible for the trust fund insolvencies that occurred in this recession. By making cash flow loans more difficult to obtain and giving significance to the AHCM measure as well as future tax increases, the USDOL has accomplished some of the objectives set out in the GAO report calling for more forward funding (higher reserves) in state UI trust funds. You’ll also recall that the GAO strongly recommended a significant increase in the FUTA wage base which would also impact state taxable wage bases. More to follow…
Steve Carter
Assistant Director
Government Relations - Tax
In 2010, employers have faced numerous increases in unemployment costs. This will continue through 2011 and beyond as states work toward rebuilding trust fund balances. In planning for unemployment taxes, employers often fail to evaluate all tax planning strategies which may reduce unemployment tax liabilities.
The attached communication was sent to our employers yesterday regarding information on Joint Account/Common Rating as a possible solution for reducing state unemployment tax liability. Tax Intelligence July 2010.pdf (130.5 KB)
Situation
The state of Kentucky recently enacted HB5 which among other things changes the computation date for the calculation of unemployment tax rates from September 30th to June 30th. It also increases the taxable wage base from $8,000 to $9,000 starting in 2012 and will increase $300 every year through 2022.
What Employers Need to Know
The change in the computation date will allow the agency to issue tax rate notices earlier. Agency officials have told us they plan to issue the notices in December instead of February or March as in previous years.
Tammy Mullin
Attached is the most recent monthly Tax Intelligence provided to our clients. The communication discusses the current economic recession and the significant pressure it has placed on the unemployment insurance (UI) system as states provide increased unemployment benefits to former employees for longer periods of time. Consequently, employers have been challenged with increased 2010 state UI tax rates despite efforts to control costs. Based on the economic data and historical trends, employers should expect significant unemployment tax rate increases in 2011. May 2010 Tax Intelligence (PDF 206.07 KB)
Webcast Summary - The Recovery from the Great Recession: How Will it Impact Unemployment Taxes
TALX recently held a webcast regarding the impacts to federal and state unemployment taxes as the economy recovers during 2010 and future years.
Please see the attached for further information. webcast_summary.pdf (162.66 KB)
Each year states adjust and release their unemployment tax rate schedules. Factors such as trust fund balances, economic conditions, and state legislation impact employer tax rate assignments. There are significant changes to the 2010 rates (as compared to 2009) because 31 states increased rates while only one state decreased rates. Attached is the final list of 2010 state minimum and maximum unemployment tax rate assignments.
This information was sent to our clients in the form of a Tax Intelligence. However we wanted to post it to our blog site in the event that it was of interest to someone who did not receive the communication. 2010_rate_tables.pdf (197.5 KB)
Some general news regarding the state of the unemployment system:
- The Senate Finance Committee met on Thursday, April 14, to address several financing issues impacting the federal-state unemployment system. Among the issues noted in the preliminary agenda for the hearing are:
- state trust fund solvency
- indexed taxable wage bases
- alternative base periods for benefit determination purposes
- work sharing
- UI experience rating issues
- expanded eligibility issues contained in the previously passed ARRA
Concern is mounting as the level of federal borrowing by states with insolvent trust funds increased to over $38 billion this week. Recent projections by the US Department of Labor predict that states will borrow over $90 billion due to this recession.
- The California EDD reported that in February that daily benefit payments were over $100 million a day during the month of February, 2010. The state has now borrowed over $8 billion from the federal government to continue paying benefits and is projected to borrow in excess of $27 billion during this recession.
- Amidst growing pressure to reorganize the South Carolina Employment Security Commission, legislation was recently passed creating a new Executive Director position that will now head the agency and be appointed to serve at the discretion of the Governor. In addition, several provisions were included to make the agency more efficient and accountable in the future. Legislation is also under consideration that would drastically change the tax system so that employers with higher experience in layoffs would pay significantly more tax than at present.
Part 4 – Federal Supplemental Compensation Program
The Unemployment Insurance (UI) Program, created by the Social Security Act of 1935, continues to serve as the first line of defense against the effects of unemployment on the economy. During the Federal Fiscal Year of 1982, the UI Program paid more than $21 billion dollars in unemployment compensation benefits to approximately 11.4 million unemployed workers. This included regular UI payments, UCX payments (military service members), UCFE payments (federal employees) and TRA payments (trade readjustment allowances). During this same time period, 4.8 million employers paid $12.9 billion in state unemployment taxes.
I can’t help myself; I have to jump ahead in time to show a comparison: The Congressional Budget Office (CBO) recently reported that UI benefit payments of $43 billion were made in 2008 and grew to approximately $119 billion in 2009. The CBO projection for 2010 is that benefit payments will reach $133 billion. Furthermore, it projected that employer unemployment taxes would increase from $38 billion in FY 2009 to $75 billion by 2013 and would range between $78-$84 billion through 2020. This is a very large burden for employers to bear, over a very long period of time, and could even be compounded by future recessions.
Back on task, unemployment benefits were originally paid to unemployed workers for a maximum of 13 to 16 weeks. By 1982, the maximum number of weeks an individual could draw UI benefits had increased to 26 weeks. A few states may have even extended the number of weeks an individual could be paid regular benefits a little longer than 26 weeks. During that same timeframe, in periods of very high unemployment, individual states could trigger on an extended benefit period. These extended benefits of 13 additional weeks were paid for through a 50/50 split of the costs between the state and Federal Governments. Throughout time, recessionary economic periods have occurred that dramatically change the way UI benefits were paid.
During one of these periods of economic downturn, when all states are impacted by high and prolonged unemployment, Federal programs have been adopted by Congress and funded by the Federal Government. These Federal Supplemental Compensation (FSC) Programs, as they were known, occurred twice during the 1970’s and again in September of 1982. The FSC programs went into effect after all regular and extended benefits were exhausted by a claimant for benefits. This effectively extended the first line of defense against economic disaster for unemployed workers when the normal UI Program was not sufficient. We will discuss these periods of economic downturn further in later blogs as we move out of the 70’s and 80’s and into the 90’s through current times and the Great Recession. There have been 13 or 14 recessions over time.
As everyone certainly knows, employers fund the entire Federal/State UI Program through State and Federal payroll taxes. Part 5 of this blog will discuss the FUTA tax offset credit and what requirements a state must meet for employers to be able to claim the credit in their state.
Rett Hensley
TALX Consultant
Part 3 – Major Program Changes
The latter half of the 20th century saw significant changes occur in the unemployment insurance (UI) program. It began in 1953 when the law was amended to impose liability on an employer who employed eight or more workers during 20 different weeks in a calendar year, or, who paid wages in excess of $12,000 in any quarter of the year. This was the first time a payroll factor was used to determine employer liability.
Coverage requirements for employers were again changed in 1956. The number of employees needed to establish a company liable for UI tax was dropped from eight down to four or more during 20 different weeks in a calendar year. At the same time, the payroll factor dropped from $12,000 down to $6,000 per quarter. Coverage requirements then remained basically unchanged for the next 16 years.
In 1972 employer liability provisions were extended to employers who had 1 or more employees performing services for them in 20 different weeks of a calendar year or had a payroll in any quarter of $1500. In addition, the FUTA taxable wage base increased from the first $3000 to $4200.
Also during 1972, coverage was extended to workers in state government and non-profit organizations. 1974 saw the inclusion of city and county government workers and additional changes occurred in 1978 when employees of large agricultural firms, domestic employers and schools below the level of college were provided UI coverage. The wage base was again increased in 1978 from $4200 to $6000. Then, in 1983, the taxable wage base became $7000 and remains at that level today. Stay tuned: I believe the FUTA taxable wage base will be substantially increased within the next year.
Below is a convenient chart that shows the changes that have occurred over the years in the FUTA taxable wage base and tax rate:
FEDERAL UNEMPLOYMENT TAX ACT
TAXABLE WAGE BASE AND RATE
|
YEAR |
TAXABLE
WAGE
BASE |
GROSS
FUTA
TAX |
NET
FUTA
TAX |
TEMP
TAX |
FUTA
OFFSET
CREDIT |
MAX
FED TAX
PER EE |
|
|
|
|
|
|
|
|
|
1936 |
Total |
1.0% |
0.1% |
|
0.9% |
|
|
1937 |
Total |
2.0 |
0.2 |
|
1.8 |
|
|
1938 |
Total |
3.0 |
0.3 |
|
2.7 |
|
|
|
|
|
|
|
|
|
|
1940 |
$3000 |
3.0 |
0.3 |
|
2.7 |
$ 9.00 |
|
1961 |
3000 |
3.1 |
0.4 |
|
2.7 |
12.00 |
|
1962 |
3000 |
3.5 |
0.8 |
0.4% |
2.7 |
24.00 |
|
1963 |
3000 |
3.35 |
0.65 |
0.25 |
2.7 |
19.50 |
|
1964 |
3000 |
3.1 |
0.4 |
|
2.7 |
12.00 |
|
1970 |
3000 |
3.2 |
0.5 |
|
2.7 |
15.00 |
|
|
|
|
|
|
|
|
|
1972 |
4200 |
3.2 |
0.5 |
|
2.7 |
21.00 |
|
1973 |
4200 |
3.28 |
0.58 |
0.08 |
2.7 |
24.36 |
|
1974 |
4200 |
3.2 |
0.5 |
|
2.7 |
21.00 |
|
1977 |
4200 |
3.4 |
0.7 |
0.2 |
2.7 |
29.40 |
|
|
|
|
|
|
|
|
|
1978 |
6000 |
3.4 |
0.7 |
0.2 |
2.7 |
42.00 |
|
|
|
|
|
|
|
|
|
1983 |
7000 |
3.5 |
0.8 |
0.2 |
2.7 |
56.00 |
|
1985 |
7000 |
6.2 |
0.8 |
0.2 |
5.4 |
56.00 |
Rett Hensley
TALX Strategic Consultant
The attached Tax Intelligence details a recent Court ruling regarding severance pay and FICA. In a controversial decision, a sixth circuit District Court held that certain severance payments made outside a qualified supplemental unemployment benefits (SUB) plan were not subject to FICA tax since the severance payments were not earnings.
Please review the attached for further details, including a possible option which might be advisable to preserve the right to a refund in the future when the case is finally resolved.
This communication was sent to our clients on March 23. TALX TAX INTELLIGENCE - ETS - 2010 MARCH - FINAL.pdf (156.75 KB)
Part 2 – The Early Years
On August 14, 2010, the Federal/State Unemployment Program will be Seventy-5 years old. I began working for the Florida Industrial Commission, Bureau of Unemployment Compensation, on January 5, 1970 (40 years ago). At that time, I was trained and supervised by individuals who were reaching the end of their careers in the unemployment program. These great pioneers set the program up from scratch after it was established by the Florida legislature in 1937, signed into law by Governor Fred P. Cone on June 9, 1937, and approved by the Social Security Board as meeting all Federal requirements on June 24, 1937. It began in a small office space above a drug store in downtown Tallahassee, Fl, with three employees. By August it had grown to 27 employees.
Newspapers around 1937 gave you a glimpse at the economy of the day. For instance, employment as a bartender was advertised at a salary of $7 per week. You could buy a six room home for $3,000, a new truck for $395, and a pot roast sold for 15 cents a pound. The initial unemployment weekly benefit amount was $15, which offered real hope for financial survival at the time.
These early years were completely devoted to getting the program up and running. Every state had to begin by locating and establishing employer’s who were considered liable for the payment of unemployment tax. Of course, this coming at a time when employers were struggling to make ends meet as a result of the Great Depression.
The original program covered workers who were employed by companies that had 8 employees on the payroll during 20 different weeks in a calendar year. It did not, however, provide unemployment coverage for large groups of workers. For instance, workers performing services in agriculture, non-profit organizations, domestic service and government work, were not covered for unemployment purposes and the employers were not liable for unemployment taxes. The Act also did not cover workers over the age of 65. The first tax and wage reports were collected from liable employers on a monthly basis, however, by 1938 states were moving to the quarterly report process that is still in use today.
Other major changes began to occur in 1939. The first being the removal of railroad workers from the Federal/State Unemployment Program due to the passage of the Railroad Unemployment Insurance Act which established a program solely for railroad workers. Around 1941 states were beginning to see a need to investigate unemployment fraud and employer audit programs began springing up around 1949. The original intent of the field audit program was to audit every employer once every four years. Never happened, and never will!
A lot of changes occurred from the 1950’s through the 1970’s. I’ll discuss them next week along with a history of FUTA tax rates.
Rett Hensley
TALX Strategic Consultant
In response to the severe recessionary economic conditions, several states either passed legislative changes in 2009 or had statutory provisions in place that resulted in significant state unemployment (SUI) tax increases for 2010. The extreme rise in unemployment taxes is expected to continue for the next several years as states work to replenish their trust funds. The Congressional Budget Office (CBO) estimates that taxes will increase from $38 billion in 2009 to $75 billion by 2013 and range from $78 - $84 billion through 2020.
The cost of high unemployment state taxes will be compounded by higher federal unemployment taxes as states struggle to repay their Title XII Loans. The states must repay the loans as well as interest on the monies borrowed.
To date, thirty two (32) state unemployment trust funds are broke and have borrowed over $32 billion from the federal government. The USDOL estimates that forty (40) states will become insolvent and borrow a total of $90 billion as a result of this recession.
There is tremendous pressure for the states to address the repayment of the federal loans as well as bringing solvency to their state trust funds, through higher unemployment taxes. On the flip side, there is unprecedented pressure from the employer community to reduce the unemployment tax burden.
As of this writing, both Florida and Massachusetts have enacted legislation to lessen or defer the significant tax increases their employers were experiencing in 2010. Hawaii, Indiana, Kansas and Maryland have similar legislation pending.
With the landscape continuously changing it will be critical for employers to stay abreast of the developments and factor them into their budget projections.
Part 1 – The Beginning
Between the years of 1916 and 1931 many states played with the idea of creating an unemployment compensation program for their citizens. None were successful, however, until Wisconsin passed the first unemployment law in 1932. At the time, the United States was deeply mired in the Great Depression and other states remained very hesitant to pass unemployment laws for fear of placing their employers at a competitive disadvantage with states that had no such laws. As a result, advocates for an unemployment program turned to the Federal Government for help.
In 1934, the Federal Government created the Committee on Economic Security. This committee was charged with the responsibility of studying the problems associated with the economic security of individual citizens and to make recommendations for both long and short term solutions. After researching old age insurance systems and unemployment programs throughout the world, they were able to present Congress with an outline of both the "Old Age and Survivors Insurance Program," considered the long term fix, and the "Unemployment Insurance Program," the short term fix.
This began a great debate regarding how the unemployment program would be organized. Some wanted complete state control. Others preferred complete Federal control. With complete state control, the same problem of interstate competition existed between states. In addition, some states would be unable to adequately fund an agency to administer the program as well as development of budget problems that could cause a raid on the unemployment fund established for paying benefits. To nationalize the program was considered equally as unacceptable because it would be inflexible to local economies, conditions of employment, rates of tax and benefit payments. For these reasons, a Federal-State unemployment insurance (UI) partnership was considered the best option for administering an unemployment program across all states.
President Franklin D. Roosevelt agreed, and on August 14, 1935, he signed the Social Security Act into law. This Act created the two social programs that exist today: Social Security and Unemployment Compensation. President Roosevelt described the Social Security Act with the following quote:
"This law represents a cornerstone in a structure which is being built but is by no means complete – a structure intended to lessen the force of possible future depressions, to act as a protection to future administrations of the government against the necessity of going deeply into debt to furnish relief to the needy – a law to flatten out the peaks and valleys of deflation and of inflation – in other words, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness."
His words were proven true for 75 years, but change may now be needed.
Rett Hensley
TALX Strategic Consultant
With the American Recovery and Reinvestment Act (ARRA) provisions set to expire, emergency unemployment benefits will end for millions of Americans. Senate action is required in order to extend the ARRA. Senator Reid has indicated that the Senate will take up the measure next week. With that in mind, the UI Coalition sent a letter to the members of the US Senate requesting that they consider the following:
• Extend the waiver of interest on loans to states to pay unemployment compensation through 2012.
• Waive the FUTA penalties on employers in states borrowing to pay unemployment benefits through 2011.
• Reduce the Federal Unemployment Tax.
• Provide $30 million in additional targeted administrative UI funding in fiscal years 2010 and 2011.
These provisions are designed to reduce the costs of unemployment to employers and enable them to create jobs thus aiding in the country’s economic recovery.
A copy of the letter as well as a more detailed explanation of each provision is attached.
UI Coalition Letter to Senate Feb 16 (3).doc (39 KB)UI Jobs Recovery February Proposal 2010 (3).doc (35 KB)
This issue has been around since the very early years of the unemployment insurance (UI) program in the United States: Where do you report an employee’s wages if the employee works in more than one state or in a different state than the employing company is located?
While in general, workers’ wages are reported to the state where the work is performed, it became clear early on that many employers had workers that crossed state lines and they wanted to avoid duplicate taxation of these wages. Therefore, an agreement was signed between the states providing a methodology known as “localization of work” to determine where wages should be reported. The US Dept of Labor developed model legislation that was passed into law in every state during the 1940’s. An agreement between Canada and the United States was signed in 1947 to include Canada in the localization of work agreement to avoid duplication of taxation when workers crossed the border.
To insure uniform interpretation of the localization of work provisions, the US Dept of Labor issued an Unemployment Insurance Program Letter (UIPL) No. 291 on July 1, 1952. I had the distinct pleasure, as Chief of Tax for the US Dept of Labor, of updating and re-releasing this information on May 10, 2004, as UIPL No. 20-04. This UIPL still serves as a guide to the business community, all states, and Canada for determining where wages should be reported.
In a nut shell, localization of work provisions should be applied in the following sequence in order to determine where wages are to be reported:
(1) Is the individual's service localized in this state or some other state?
(2) If his/her service is not localized in any state, does he/she perform some service in the state in which his/her base of operations is located?
(3) If the individual does not perform any service in the state in which his/her base of operations is located, does he/she perform any service in the state from which the service is directed and controlled?
(4) If the individual does not perform any service in the state from which his/her service is directed and controlled, does the individual perform any service in the state in which he/she lives?
For further explanation and examples, UIPL No. 20-04 may be found in its entirety by following the link below:
http://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=1565
Rett Hensley TALX Consultant
The Congressional Budget Office (CBO) has issued its budget and economic outlook for fiscal years 2010 through 2020. The report concludes, in part, that unemployment taxes will increase from $38 billion in 2010 to $75 billion by 2013 and continue to rise to $84 billion by 2020.
An employer’s unemployment rate is determined not only on the employer’s individual experience, but on the health of the state’s trust fund balance. As of this date 32 states (including Virgin Islands) have borrowed federal funds in order to pay unemployment benefits. A total of 12 states have borrowed in excess of $1 billion.
In December, 2009 TALX hosted a webcast detailing "The Great Recession of 2009" We discussed the damage done and the steps to recover. If you were not able to attend the webcast, attached is the link so that you can listen to it now.
http://talxcorp.acrobat.com/etswebcastdec2009/
The U.S economy has been, and continues to be in a "Great Recession." While many economists are now claiming that the economy has turned the corner and the recession is beginning to fade, the Total Unemployment Rate (TUR) is still hovering around 10%. This is a normal occurrence when the country is recovering from a recessionary period. However, the depth and length of this economic disaster is like no other in history with the exception of the Great Depression.
It has now been 26 months since the recession officially began in December of 2007. By comparison, the worst recession in the previous 40 years (1981-1982) lasted only 16 months. Job Losses are more than double the '81/'82 recession, UI Claims are at an all time high, and the duration of the average claim is around 26 weeks (the highest in recorded history). But wait, it could very well get worse in 2010 before it starts to get better.
Insolvent States
All of this has taken a heavy toll on the Unemployment Trust Fund (UTF). Thirty states have depleted their accounts in the UTF and are taking or currently requesting Title XII loans from the Federal Unemployment Account (FUA). Below is a breakdown of state borrowing as of January 21, 2010:
|
Alabama |
$175,231,403.41 |
|
Arkansas |
$253,484,708.57 |
|
California |
$6,700,256,343.45 |
|
Colorado |
$9,466,584.15 |
|
Connecticut |
$239,895,065.91 |
|
Florida |
$1,137,000,000.00 |
|
Georgia |
$139,000,000.00 |
|
Idaho |
$130,638,625.22 |
|
Illinois |
$1,407,739,009.96 |
|
Indiana |
$1,572,564,697.49 |
|
Kansas |
- |
|
Kentucky |
$623,137,951.27 |
|
Massachusetts |
- |
|
Michigan |
$3,333,882,333.32 |
|
Minnesota |
$375,632,140.00 |
|
Missouri |
$527,780,078.39 |
|
Nevada |
$183,065,311.55 |
|
New Hampshire |
- |
|
New Jersey |
$1,134,957,333.38 |
|
New York |
$2,417,631,993.59 |
|
North Carolina |
$1,719,832,029.38 |
|
Ohio |
$1,857,337,799.00 |
|
Pennsylvania |
$2,130,454,479.20 |
|
Rhode Island |
$146,534,383.00 |
|
South Carolina |
$736,197,781.00 |
|
South Dakota |
$11,743,900.67 |
|
Texas |
$1,528,764,140.92 |
|
Virginia |
$172,723,000.00 |
|
Virgin Islands |
$9,894,845.08 |
|
Wisconsin |
$1,026,179,822.02 |
Kansas, Massachusetts and New Hampshire have requested approval from the Secretary of Labor to take Title XII loans, but have yet to drawdown their first advance. Twelve states have borrowed in excess of $1 billion, while NY, MI and PA are over $2 billion. California leads the way with $6.7 billion.
Insolvent Federal Accounts
With almost $30 billion in Title XII loans being advanced to the states, the UTF Federal accounts were also depleted during 2009. There are three Federal accounts in the UTF:
1) The Employment Security Administration Account (ESSA);
- This account receives 80% of the Federal Unemployment Tax (FUTA) collected by the Internal Revenue Service.
- Used to fund administration of state UI and ES programs.
2) The Extended Unemployment Compensation Account EUCA);
- Receives 20% of FUTA revenues
- Funds the Federal share of extended benefits and now the EUC08 emergency benefits
3) The Federal Unemployment Account.
- Funds Title XII Advances to states that have depleted their state account
With the EUCA and FUA accounts both becoming insolvent during 2009, Congress passed HR 3357, and the President signed it into law, allowing the UTF to drawdown funds "as needed" from General Revenue to continue paying extended and emergency benefits and making interest free loans to states. The UTF, however, is required to pay interest on these General Revenue loans at the same rate the Treasury pays on the National Debt, approximately three and three eighths per cent. As of December 3, 2009, the UTF had already taken $18.9 billion in General Revenue loans.
Where to Now?
The US Dept. of Labor is now projecting that approximately 40 states will borrow up to $90 billion dollars before the end of 2012 and states are starting to wrestle with how this will be paid back and how long it will take. Do they raise taxes?; Do they reduce benefits?; Do they wait for a Federal "bailout?" Different states are taking different approaches.
The National Association of State Workforce Agencies (NASWA) recently conducted a survey of states regarding solvency issues. The survey results indicated that approximately 24 states plan to increase their taxable wage base for 2010. In 17 states (AK, HI, ID, IA, MN, MT, NV, NJ, NM, NC, ND, OK, OR, UT, VI, WA, WY) the taxable wage base is indexed and will happen automatically as a result. The seven remaining states (AR, FL, IN, NH, TN, VT and WV) passed legislation to raise the taxable wage base. However, at least two of those states, Fl and IN, are now working on legislation to postpone the implementation of the newly passed tax legislation in order to avoid increasing taxes on employers at a time when the economy is trying to recover. A large increase in employment tax is feared to prolong the high unemployment rate as employers will continue not hiring or creating new jobs while trying to reduce costs and increase profits. These states also site the possibility of a Federal Government bailout in the form of relief from repaying Title XII loans as justification for the delay. My personal opinion is that this probably will not happen because the UTF is borrowing from General Revenue, with interest accruing. Who bails out the UTF and General Revenue Account? The tax paying public!
The NASWA survey also concluded that 28 states will see an increase in their tax rate schedules in 2010. While 10 states are already at the maximum rate schedule and would have to pass legislation to increase further, most of the states have automatic increases built in to the experience rating structure when trust fund balances are low. If there is one thing you can count on, it is that most, if not all, states will see a UI tax increase in 2010. The NASWA survey indicated these increases will range between 2.5% to 600%.
FUTA Increase?
According to UWC President, Doug Holmes, The House Ways and Means Committee is looking at the possibility of increasing the FUTA taxable wage base to address the large deficit in the Federal Accounts in the UTF. In my opinion, an increase in the $7,000 FUTA taxable wage base is very likely within the next year and may even be indexed to create more flexibility to increase revenues during recessionary periods. In addition, increasing the FUTA taxable wage base will require all states to approve a taxable wage base that is equal to, or greater than, the FUTA wage base, thus, improving the stability of state accounts in the process.
Rett Hensley
Consultant
This was sent to our clients this week. We wanted to share it with others who may not have received it.
Situation
The beginning of a calendar year is a popular time for employers to implement a reorganization, merger, acquisition or divestiture. While transactions occurring at the beginning of a year may minimize certain employment issues such as wage base restarts and multiple Forms W-2, it is critical to consider other employment tax impacts and to ensure transactions are properly reported. Listed below are a few of the common employment tax compliance, payroll systems integration, and general issues that a payroll department encounters with most mergers, acquisitions, or reorganizations. Other factors may also need to be addressed depending on specific circumstances.
Solution
Employment Tax Compliance Considerations
- Registration for new state income tax (“SIT”) withholding, local income tax (“LIT”) withholding, and state unemployment tax (“SUI”) accounts
- Required status updates to state workforce agencies related to transfers of employees, unemployment experience and common control provisions
- Account closures for inactive SIT, LIT, and SUI tax accounts
Payroll Systems Integration Considerations
- Potentially new Forms W-4 required from transferring employees (including state and local equivalents) due to change of employers
- Integration of potentially different pay cycles on employment tax liability/deposit dates
Other General Employment Tax Considerations
- Pre-acquisition activity to take advantage of available planning options; to identify potential refunds; to avoid the unintentional assumption of liabilities; and to develop an appropriate transaction integration plan
- Third party payroll provider requirements and constraints (timing, additional forms, powers of attorneys, etc.)
- Review payroll policies and procedures for consistency and consolidation; develop "best practices" (i.e. nonresident withholding, third party sick pay, fringe benefits, etc.)
Additional Employment Tax Considerations When Transaction Occurs Mid-Year
- Impact of transaction type (stock, asset, and/or merger) on reporting Forms W-2, 941, and 940.
- Successor status provisions associated with Social Security, federal unemployment ("FUTA"), and SUI regarding impacts on taxable wage bases
- Required tax account reconciliations to match deposits to liabilities reported on Forms W-2 for certain mid-year transactions at federal, state and local levels
Value
Proper compliance with federal, state and local employment tax laws is critical regardless of the effective date of a transaction. For more information on compliance requirements and planning options, please contact your tax consultant or Pete Krieshok at (314) 214-7325 or pkrieshok@talx.com.
The national unemployment rate is currently 9.8%. The number of individuals claiming unemployment has placed a substantial strain on state unemployment trust funds. In January 2008 the national unemployment rate was 4.9%. Unemployment benefit payments have more than doubled while tax revenues have decreased. Given this scenario, many states are finding it difficult to maintain solvent trust fund balances and have been forced to take Federal Title XII loans. In response to the current economic situation, states have passed legislation to increase tax revenues to replenish depleted trust fund balances.
The following states have passed legislation in order to boost revenues:
Florida – SB 810 increases the taxable wage base from $7,000 to $8,500 for tax years 2010 through 2014 and changes the rules for calculating the final and variable adjustment factors used in tax rate calculations.
Indiana – HB 1379 increases the taxable wage base from $7,000 to $9,500 and institutes a new set of rate schedules to be used beginning in 2010. The penalty rate has also increased from 5.6% to 12.0% in 2010.
New Hampshire – SB 129/LSR 998 increases the taxable wage base from $8,000 to $10,000 for 2010, $12,000 for 2011 and $14,000 for 2012 and beyond. In addition, another 0.5% surcharge, on top of the 0.5% mentioned below, will be added to all employers’ rates and a 1.5% fund balance increase will be added to all negative balanced employers’ rates effective for at least the first and second quarters, 2010.
Due to a low state trust fund balance, an emergency 0.5% unemployment tax surcharge will be applied for the remainder of 2009.
South Dakota – Due to a low state trust fund balance, an emergency 1.5% unemployment tax surcharge will be applied to employers on taxable wages paid 10?1?09 through 12?31?09. This surcharge is expected to remain in effect through at least the second quarter, 2010.
Tennessee – HB 2324/SB 2315 increased the taxable wage base from $7,000 to $9,000 retroactive to January 1, 2009 and increased unemployment tax rates by 0.6% effective January 1, 2009. The 0.6% increase is expected to remain in effect through at least the second quarter, 2010.
Vermont – HB 442 increased the taxable wage base from $8,000 to $10,000 for tax year 2010.
West Virginia – SB 246 increased the taxable wage base from $8,000 to $12,000 effective second quarter, 2009.
TALX has a team dedicated to track and monitor pending and new unemployment tax legislation. Our tax experts can assess how legislative activity will impact unemployment taxes. Employers who are forecasting the impact of legislative changes on 2010 unemployment costs will avoid unexpected tax increases and budget variances throughout the coming year.
We recently held a Webcast where we had some experts talk about the impact the current recession is going to have on employer's taxes next year and in to the future. It also addressed the solvency of the trust funds in many states and talked about legislation that may have some impact. If you're interested in hearing the presentation, we have it available at the following link. The title is "Unemployment Taxes-An Emerging Crisis?"
http://www.talx.com/News/IndustryInsights/index.asp
Pat Powell
This past April, we discussed the fact that 14 states were borrowing funds from the federal government in order to pay unemployment benefits. At the present time there are 18 states who have borrowed $13,576,707,278.17. The state of MN has repaid their outstanding loan, while the states of FL, ID and RI have recently had to borrow federal dollars to keep their trust funds solvent. Currently the federal unemployment fund has $4,950,229,197 in its coffers. There are signs that things are starting to turn around. For example, In July, employers took 2,157 mass layoff actions involving 206,791 workers. The number of mass layoff events decreased by 606 and the number of initial claims decreased by 72,440 from the prior month. These seem to be positive signs. However the true marker for the "bottom" in the unemployment area will be when monthly new claim filings drop to below 400,000 per month. Another positive indicator that employment has begun to stabilize will be when consumer spending starts to increase. We will continue to monitor the economic indicators and report accordingly.
As unemployment rates continue to rise and state trust fund balances are depleted, the state agencies must look for ways to increase unemployment tax revenues. Along with raising the tax rates, many states will increase the taxable wage base. Looking forward to 2010, at least thirty (30) states are expected to increase their taxable wage base. Six (6) states have already passed legislation to increase the wage base and five (5) others have legislation pending. The remaining nineteen (19) have automatic escalators that trigger an increase when the trust fund balance falls below a certain level. At this point in time, it is anticipated that the trust fund balances will cause an increase to the wage base. Of the remaining twenty three (23) states, twenty (20) of them would have to enact legislation in order to increase the wage base. Nothing has been introduced at this time. The remaining three (3) do have automatic escalators, but the trust fund balances have yet to be determined. In an economic situation such as this, the last thing an employer needs is an increase in taxes. That however is what employers will see in at least thirty (30) states. We are monitoring the economic situation of each state to determine the potential impact it may have on our employers Employers who would like help in budgeting for 2010 should contact Pete Krieshok at (314) 214-7325 or by email at pkrieshok@talx.com
TALX recently held a webcast regarding the impact of the current recession on federal and state unemployment taxes and what employers should expect in 2009 and future years. TALX provided a national economic update on state unemployment trust fund solvency, individual state unemployment rates and impacts on 2009/2010 FUTA taxes. The implications of the American Recovery and Reinvestment Act of 2009 as well as insight regarding budgeting considerations for FUTA and SUI were discussed as well.
The upshot of this discussion is that currently 14 states have requested Title XII loans from the federal government. If they are not repaid within established time frames, those states will lose their FUTA credit, thus increasing employers’ federal taxes. Virtually all states have seen dramatic drops in their trust fund balances which will cause state unemployment rates to increase. Couple this with individual employer claim and benefit charge activity, many employers could be facing significantly higher unemployment tax rates in 2010 and beyond.
TALX has traditionally performed tax rate projections for interested employers. However, an even more robust forecasting tool has been created that will provide an employer with more information with which to make informed decisions regarding unemployment taxes. For more information on the enhanced forecasting tools, please contact Pete Kreishok at 314.214.7325 or via email at pkrieshok@talx.com
The current economic recession is sending more and more companies into financial crisis. The number of businesses filing for bankruptcy protection is at its highest level in over two years.
According to the AACER (Automated Access to Court Electronic Records) there were 7,843 commercial bankruptcy filings during the month of March. This was up 23% from February. It is also the highest monthly total of business filings since 2006.
Other data from the AACER showed that in the first quarter of this year 20,251 businesses sought either Chapter 7 or Chapter 11 protection; a 52.4% increase over the 13,291 business bankruptcy filings during the same period last year.
Bankrupt employers, trustees and anyone considering purchasing bankrupt businesses may have specific procedural requirements to insulate themselves from additional employer liabilities.
Pat Powell
TALX has received information from the WORKFORCE West Virginia, that the unemployment taxable wage base will be increasing from $8,000 to $12,000 effective with the second quarter, 2009.
West Virginia Senate Bill 246 was passed on April 11, 2009 and the wage base change became effective with this passage. The state will be issuing a letter to employers in the near future. They have already contacted a few of the larger payroll providers.
It is highly unusual to have a wage base change in the middle of the year; credit these unusual economic times. Employers will need to immediately change their payroll systems to reflect the new wage base. Employers will not be required to file amended first quarter returns as the change was not effective until after the first quarter ended. However, employees who met the first quarter wage base of $8,000 will now be subject to tax on the next $4,000 of taxable wages.
Pat Powell
According to the Bureau of Labor Statistics employers took 2,933 mass layoff actions involving 299,388 workers in March. These are the highest levels on record. Mass layoff events increased by 164 from February and initial claims increased by 3,911. Twenty-six states reached program highs for March in terms of average weekly initial claims.
These types of unemployment numbers are taking their toll on the state trust fund balances. As of April 23, 14 states have borrowed money from the Federal Unemployment Fund. The outstanding loan balance is currently over $9.7 billion.
Both California and Michigan have already borrowed over $2 billion each. This is the first time since 1983 that any state has borrowed over $2 billion and it’s only April.
Pat Powell
The Employer Tax Services Group will be holding webcasts on May 6 & 7, 2009. These webcasts will focus on the impact of the recession on unemployment taxes for 2009 and beyond. The newly signed American Recovery & Reinvestment Act will be discussed in detail as well as Trust Fund solvency and subsequent Title XII Loans. Even though unemployment tax rates have been set for 2009, it's never too early to understand how the recession and new law changes will affect future tax payments. To attend one of the webinars, just click here.
The current state of the national economy has adversely affected every state’s trust fund balance. When it becomes apparent that the trust fund does not have adequate reserves to pay unemployment benefits, the Governor may request a loan under Title XII of the Social Security Act. If a state has an outstanding loan balance on January 1st of two consecutive years and has not repaid the balance by November 10th of the second year, employers in that state are at risk of losing a portion of their FUTA tax credit. As of April 13th there are 14 states with Title XII loan balances and there are several other states that may need to borrow in the near future. Only employers in the state of MI are at risk of losing a portion of their FUTA tax credit in 2009. However there are at least 4 additional states that are at risk of losing credits in 2010 and significantly more in 2011 and beyond based on today’s outstanding loans. It will be important to stay abreast of this situation in order to budget for these potential tax increases.
Pat Powell
This weekend I read in The Wall Street Journal (Saturday/Sunday April 4-5, 2009 edition) that U.S. employers shed 663,000 jobs in March, pushing the nation's unemployment rate to its highest level since 1983. The article further went on to discuss "The jobless rate jumped to 8.5% from 8.1% - and many forecasters expect it to top 10% by later this year. The downturn, which started in December 2007, appears to be on track to surpass the two longest recessions since the Great Depression."
Pat Powell
I read today a notice issued by the IOWA Workforce Development which outlined the online tax filing procedures for the quarterly Employer’s Contribution and Payroll Report (Form 65-5300). This will be a time saver for employer that report employment in the state. Please note, effective January 1, 2009 Iowa increased the penalties and fees for late or insufficient quarterly Employer’s Contributions and Payroll Reports.
Click here for a PDF of the notice.
Pat Powell
IRS CIRCULAR 230 DISCLOSURE: Any tax advice in this communication is not intended or written by TALX to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.
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