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Are Unemployment Taxes Costing You Money?

by Will HartApril 1, 2013 11:50 AM

I got a call last week from a client who has only been with us for a few months. He started back in July of 2012 and just received his first few invoices from the new year. He was pretty upset that his state unemployment tax had gone up substantially compared to November and December. Being in the payroll business for about 20 years, and with this being about the tenth of these calls I’ve taken in January, I knew where this conversation was going to lead.

The first question I ask is "Did you know about the State Unemployment Tax Authority (SUTA) wage cap?" In Ohio, the employer is only charged SUTA tax on the first $9,000 in earnings for each employee.

In his case, all of his employees had earned that much by September. Except for his one new hire in October, his employees had already capped out and met the wage limit. In November and December he was only paying tax on one employee. In January, everyone starts from ground zero and is taxed until they reach that $9,000 limit again.

The second thing we discussed was the number of claims he had back in 2010 and 2011. Yes…those claims stick with you for eternity. It’s like your bank account: once you write that check, the money is gone.

I reviewed the list of claims from JP, our claims administrator. 2010 was a bad year for our client, as it was for almost everyone, and he had to lay off four employees. Our client told me that he brought them back to work after about eight months. But by then, then the damage was already done. He had just under $20,000 charged to his unemployment account. His unemployment rate went up in 2010 from 3.2% to 7% in 2013.

Out client also mentioned something that really bothered me. He said that someone filed a claim, but he didn’t have time to fight it, so he let it go through. That was in 2011, and that claim had hit his account for $4000, and was still coming out. Because you only have 21 days to appeal a claim, he was out of luck.

Now that he’s with GMS, he doesn’t have to worry about this. We take care of managing the claim from start to finish, with a minimal amount of his time.

Do you know what your rate is? Do you know why it’s 3% or 8%? Do you know what your cost will be in 2013? Have you heard about the proposed federal legislation changed for 2014?

Check back on our blog for a follow-up post on these topics, and share your thoughts in the comments below.

“Finding Company Tax ID,” © 2010 Calita Kabir, used under the Creative Commons Attribution-ShareAlike 2.0 Generic license.

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