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September 2021

State & Local Tax Registration Services

As a result of COVID-19, employers are now empowered with a new work environment for employees.  Many employers are now giving their employees the option to work from home.  Also, employers are hiring across the country despite where the corporate headquarters or physical work locations are positioned.  From a Payroll Tax prospective, employers may have to register for new state unemployment, state withholding and local income tax account numbers that are not currently set-up in that state or locality.

Registering for tax accounts can be very time consuming for any Payroll Department, especially if they have never registered in that jurisdiction.  Each state and locality have their own nuances and registration processes.  Employers will need to complete these for the employee that is working from home prior to the first pay date.

One of the most tedious payroll tax registrations to complete are local income tax accounts.  There are over 4,000 taxing jurisdictions across 17 states.  Depending on the state, local income taxes may be levied by county, municipality, school district, etc.

For example, there are over 2,500 municipalities and approximately 400 school districts that impose income or wage taxes in Pennsylvania and over 600 municipalities and approximately 200 school districts in Ohio.

Over the last several months, we have received requests from our clients to assist in these areas and we heard them loud and clear.  As a result, Thomas & Company now offers State & Local Tax Account Registration Services!  We have team members with 20+ years of experience in tax registrations and we would be happy to assist you!

If you are interested in Thomas & Company partnering with your team to provide these additional services, feel free to contact Jeremy Muchnick, our Director of Tax Recovery Services, at jmuchnick@thomas-and-company.com.

 

United States Department of Labor’s Unemployment Claims Report – Week Ending September 18, 2021

The Unemployment Insurance Weekly Claims report for the week ending September 18, 2021 has been released by the United States Department of Labor.

Week Ending 9/18 Prior Week
Seasonally adjusted initial claims: 351,000 332,000
4 week moving average: 335,750 335,750
Seasonally adjusted insured unemployment rate: 2.10% 1.90%
Seasonally adjusted insured unemployment number: 2,845,000 2,665,000
4-week moving average: 2,804,000 2,807,500
Number of unadjusted claims: 306,209 262,619
Unadjusted insured unemployment rate: 1.80% 1.70%
Unadjusted number claiming UI benefits: 2,534,759 2,328,822

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

 

Virginia’s UI System will be Offline During Transition to New System

The Virginia Employment Commission (VEC) is cutting over to a new, modernized system beginning on Wednesday, September 29 at 12:00 pm EST for VEC online systems and at 6:00 p.m. on Thursday, September 30 for VEC telephone services. This transition will last approximately 5-7 calendar days. This transition period will impact both claimants and employers. Claimants and employers should take any necessary time-sensitive actions prior to the changeover period. If this is not possible, you will need to complete these actions once the changeover period has ended.

VEC will be in a changeover period after the dates mentioned above. The “changeover period” is the period of time in which the current Unemployment Insurance system, including Gov2Go, will be down in preparation for the go-live of the new Virginia Unemployment Insurance system (VUIS).

Employers and third-party administrators like Thomas & Company will not have access to any VEC services other than Appeals during the changeover period. Appeals functions (such as filing an appeal, participating in a scheduled appeal hearing, and registering a telephone number for an upcoming appeal hearing) will continue without interruption.

  • This means that VEC will not be issuing claims during the changeover period so you may see a decrease in activity temporarily in VA. We will not be able to receive or respond to SIDES claims during this time period and will resume normal correspondence with the state once the new system is operational. If you have any claims that have a due date between September 29 and October 6, 2021, please try to provide the information to Thomas & company prior to September 29th to minimize any delays in adjudicating the claims.
  • Thomas & Company will be able to submit evidence, a request for postponement, letter of representation, or withdrawal letter concerned with a pending appeal or hearing before First Level Appeals or Commission Appeals during the transition using all means of correspondence outlined on the Notice of Appeal.
  • During normal operation hours, Thomas & Company will only have access to the staff in the Administrative Law Division to discuss procedural matters concerning a pending appeal case or how to file an appeal.  All other questions concerning a claim (including resumption of payments based on an examiner’s decision) will be directed to the Customer Call Center by T&C once the changeover period has ended.
  • If you have a VA Gov2Go account, you will no longer have access after the cutoff date. The new Virginia Unemployment Insurance System (VUIS) will completely replace Gov2Go and all actions you previously took in Gov2Go will need to take will occur in VUIS.

Claim Activity will also be halted during this transition.  Claimants will not be able to file a new, additional, or reopened claim while the system is offline. Once the new system is online, claimants will be able to request the claim be made effective for the week originally filed while the system was down.

  • Claims in pending status will remain in this status and VEC staff will not have access to claims or benefit information during the transition.
  • Claimants will not be able to upload any documentation or forms during this period. It is suggested to upload any documents prior to the September 29 cut off.
  • Claimants will not be able to file their weekly claims during the transition. In order to avoid a delay in payment, it is suggested that weekly claims for the week ending September 25 be filed between September 26 and September 30 before the changeover period initiates.
  • Claimants will not receive benefit payments during the transition. Individuals who have not yet filed for the week ending September 25 prior to the changeover period will be able to file a weekly claim following the changeover period.
  • The Customer Contact Center will not be able to take any calls during the cutover period.

For more information on the transition, please visit https://www.vec.virginia.gov/node/13530. We will continue to monitor the VEC website for updates and will notify you when normal operations resume.

 

United States Department of Labor’s Unemployment Claims Report – Week Ending September 11, 2021

The Unemployment Insurance Weekly Claims report for the week ending September 11, 2021 has been released by the United States Department of Labor.

Week Ending 9/11 Prior Week
Seasonally adjusted initial claims: 332,000 310,000
4 week moving average: 335,750 339,500
Seasonally adjusted insured unemployment rate: 1.90% 2.00%
Seasonally adjusted insured unemployment number: 2,665,000 2,783,000
4-week moving average: 2,807,500 2,840,250
Number of unadjusted claims: 262,619 284,287
Unadjusted insured unemployment rate: 1.70% 1.90%
Unadjusted number claiming UI benefits: 2,328,822 2,600,083

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

 

United States Department of Labor’s Unemployment Claims Report – Week Ending September 4, 2021

The Unemployment Insurance Weekly Claims report for the week ending September 4, 2021 has been released by the United States Department of Labor.

Week Ending 9/4 Prior Week
Seasonally adjusted initial claims: 310,000 340,000
4 week moving average: 339,500 355,000
Seasonally adjusted insured unemployment rate: 2.00% 2.00%
Seasonally adjusted insured unemployment number: 2,783,000 2,748,000
4-week moving average: 2,840,250 2,855,000
Number of unadjusted claims: 284,287 287,751
Unadjusted insured unemployment rate: 1.90% 1.90%
Unadjusted number claiming UI benefits: 2,600,083 2,617,062

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

 

Leave Time Allowed in Missouri for Victims of Domestic/Sexual Violence

Employees in Missouri who are victims of domestic or sexual violence or have a family or household member who is a victim of domestic or sexual violence, may take unpaid leave from work to address such violence by:

  • Seeking medical attention for, or recovering from, physical or psychological injuries caused by such violence.
  • Obtaining services from a victim services organization.
  • Obtaining psychological or other counseling.
  • Participating in safety planning, temporary or permanently relocating, or taking other actions to increase the safety of the employee or employee’s family or household.
  • Seeking legal assistance or remedies to ensure health and safety.

Individuals who work for a business with 50 or more employees are entitled to up two work weeks of unpaid leave within a 12-month period to address the related matters listed above.  Leave may be taken intermittently, or they may work a reduced schedule.  The employee shall provide to the employer 48-hours’ notice unless such notice is not practical.  Businesses employing 20-49 employees are entitled to up to one work week of unpaid leave with any 12-month period.

What do I need to do as an employer?

Employers must deliver the notice of the availability of this unpaid leave for domestic or sexual violence to each person employed by the employer in Missouri no later than October 27, 2021. For each person hired after October 27, 2021, the notice must be delivered upon the start of employment.  The State of Missouri has a poster that can be sent to each employee or posted in areas visible to employees such as breakrooms.  https://labor.mo.gov/sites/labor/files/pubs_forms/LS_112.pdf.  Thomas & Company does not have access to the information needed to deliver this notification to impacted Missouri employees.

If an employee elects to take the unpaid leave for domestic or sexual violence, will they be eligible for unemployment benefits for those weeks?

We will be monitoring this situation with the state of Missouri.  In many states with similar provisions, the victims are eligible for benefits.  If you have an employee who request an unpaid leave for domestic or sexual violence, you should document the following for the potential claim:

  • How much notification was provided by the employee prior to taking the leave?
    • The employee should provide the employer with at least 48 hours advance notice of their intention to take this unpaid leave, unless providing such notice is not practical.
  • When an unscheduled absence occurs, can I take any action against the employee?
    • You should not take any actions against the employee as long as the employee, upon request of the employer and within a reasonable period after the absence, provides certification that they are a victim of domestic or sexual violence.
  • What kind of documentation does the employee need to provide to prove they were a victim of domestic or sexual violence?
    • The employee can satisfy the certification requirement by providing a sworn statement of the employee and one of the following:
      • Documentation from an employee, agent, or volunteer of a victim services organization, an attorney, a member of the clergy, or a medical or other professional from whom the employee, their family or household member has sought assistance in addressing domestic or sexual violence and the effects of such violence.
      • A police or court record.
      • Or other corroborating evidence.

For more specifics on this Subsection of the Missouri Code, see https://revisor.mo.gov/main/OneSection.aspx?section=285.630&bid=49910&hl=.  For a definition of the terms outlined in the code, please refer to https://revisor.mo.gov/main/OneSection.aspx?section=285.625&bid=49909&hl=.

As always, we will continue to monitor any unemployment cases in Missouri related to this unpaid leave and provide additional guidance and updates as they become available.  If there are any questions, please do not hesitate to contact us or visit our website for the latest news and updates.

United States Department of Labor’s Unemployment Claims Report – Week Ending August 28, 2021

The Unemployment Insurance Weekly Claims report for the week ending August 28, 2021 has been released by the United States Department of Labor.

Week Ending 8/28 Prior Week
Seasonally adjusted initial claims: 340,000 353,000
4 week moving average: 355,000 366,500
Seasonally adjusted insured unemployment rate: 2.00% 2.10%
Seasonally adjusted insured unemployment number: 2,748,000 2,862,000
4-week moving average: 2,855,000 2,901,500
Number of unadjusted claims: 287,751 297,765
Unadjusted insured unemployment rate: 1.90% 2.00%
Unadjusted number claiming UI benefits: 2,617,062 2,763,176

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

 

COVID-19 Impact on 2022 Tax Rates and Beyond

Episode One – 9/7/2021

Kicking off our September series regarding the impact of COVID-19 on state unemployment tax rates for 2022, we want to take this opportunity to set the table for what you should expect from this series.

With the unprecedented claims volumes over the past year, state unemployment trust funds have taken a big hit.  Both the federal government and states are doing everything they can to minimize the impact to employers and trying to defer any increases in taxes so employers can invest in recovery efforts.  But at some point, in time, the states will need to take actions to replenish the depleted trust funds in each state.

In most years, state unemployment taxes collected exceed the benefits paid, this obviously was not the case in 2020.  As a result, states will need to find ways to replenish the trust fund while minimizing the impact to employers.

When states encounter a short fall in their trust fund, they now have four options:

  • They can reduce unemployment benefits paid to claimants
  • They can borrow money from the Federal Unemployment Tax (FUTA) Reserves to boost their trust fund balances
  • They can use emergency funding from the American Recovery Plan Act to restore Trust Fund balances to pre-pandemic levels
  • They can increase taxes on employers

All of these options can have an impact on employers, and we suspect that states will be employing one or more of these tactics in the next few years to address the depletion of the state trust funds due to the COVID-19 pandemic.

This is Episode One of a four-part series during the month of September that will delve into each of these options, so you are prepared for 2022 unemployment tax rates.  Tune in next Tuesday (9/14) for Episode 2!

Episode Two – 9/14/2021

As we discussed in Episode 1 last week, state unemployment agencies have four options when they encounter a short fall in their state unemployment trust fund.  Three of those four options will be covered in this week’s Episode:

  • Reducing Unemployment Benefits Paid to Claimants
  • Title XII Loans from the Federal Unemployment Tax (FUTA) Reserves
  • Emergency Funds from the American Recovery Plan Act

Reducing Unemployment Benefits Paid to Claimants

When states are facing a short fall in their trust fund, they have the option to reduce the benefits that are paid to claimants to mitigate the impact of additional claims on the overall trust fund.  While a majority of states will pay out benefits for 26 weeks, some states set the duration of benefits for claimants based on the solvency of the Trust Fund or the state’s overall unemployment rate.    For example, Tennessee recently enacted legislation that will cap the number of weeks a claimant can collect benefits based on the state’s overall unemployment rate. Benefits collected could be as low as 12 weeks and up to 20 weeks if unemployment in the state balloons to over 9%.  Based on historic unemployment rates in TN, most claimants would see their benefits stopped after 13 or 14 weeks.  Lawmakers estimate that this move will save the state up to $24 million per year.

Title XII Loans from the Federal Unemployment Tax (FUTA) Reserves

The Federal Government has had a program in place for states to borrow funds when their trust funds reach certain levels. These Title XII loans are available to states in need and these loans have to be paid back in full or the FUTA taxes paid in that state are offset.  Currently a number of states have an outstanding balance that must be paid by November 10, 2022 in order to avoid a reduction in the employer FUTA credit.  This credit reduction would increase the FUTA taxes paid per employee for 2022 from $42 to $63. For every year this balance is outstanding, employers can pay an additional $21 per employee in FUTA tax. This is another situation that we are monitoring as it could have an impact on your taxes in 2022 and beyond.

Emergency Funds from the American Recovery Plan Act

The American Recovery Plan Act has provided another option for states with $350B in emergency funding provided to state, local, territorial, and tribal governments to directly address negative economic impacts of the COVID-19 public health emergency.  States can allocate their share of the money into 15 different categories, one of those being deposits to the state UI Trust Funds to restore their trust fund balances to pre-pandemic levels.

This is potentially good news for employers.  If the states elect to use some of the allocated funds to replenish their trust funds or pay back the advances on the Title XII loans, the impact on tax rates can either be minimized or eliminated altogether.  Twelve states have enacted legislation to distribute a portion of their ARPA allocation to replenishing the Trust Funds/Title XII Advancements.  The exact level of impact will vary from state to state as some are able to allocate sufficient funds to bring their trust fund back to pre-pandemic levels while others can only make a dent in the deficit.

That’s all for this episode.  Looking forward to next week, we will discuss in detail the fourth option for states to replenish the trust fund and arguably the most important option for employers: Increasing Taxes on Employers.  Tune in next Tuesday (9/21) for Episode 3!

Episode Three – 9/21/2021

In Episode 2 last week, we discussed three of the four options that state agencies have to replenish depleted state unemployment trust funds.  In this Episode, we will cover the fourth option and the most significant one affecting employers: Increasing Taxes on Employers.

The most common method for building up the state’s trust fund is to adjust the amount of taxes paid by employers.  States will accomplish this by:

  • Raising the state’s taxable wage base
  • Increase the factors used to set the tax rates (rate tables)
  • Add surcharges and other assessments to build up the trust funds

Taxable Wage Bases – are they where they should be?

The state trust funds are financed through employer payroll taxes and the taxable wage base is the portion of each worker’s wages that are subject to UI taxes.  States are required to have a wage base that is at least as high as the federal taxable wage base of $7,000, which has not significantly increased in nearly a century. There is talk in Congress that a federal policy that raises the minimum unemployment insurance wage base to at least half of the Social Security wage base (currently $142,800) would improve the solvency of the UI system and allow states to have a greater role in financing adequate benefits in the next economic downturn, according to Andrew Stettner, Senior Fellow at The Century Foundation.

In simple terms, UI benefits are based on a rate that currently averages a payout of nearly 50 percent of a worker’s wages, but taxes can only be charged on 25 percent of a worker’s wages. It is not surprising that the U.S. Department of Labor found that most states in 2020 were charging below the minimum financing rate needed to recover benefits and build a trust fund.

States that are more likely to have solvent trust funds or recover quicker are the ones that index their taxable wage bases to the average wages in the state.  States like WA, ID and NJ are among the 19 states that use this type of indexing and are among the states with the highest taxable wage bases in the US.  We expect that if a federal mandated taxable wage base increase does not occur, states will increase their taxable wage bases for the next few years to bring more money into the trust funds.  AZ, CO, CT, and NY have already announced taxable wage base hikes for 2023 and beyond.

State 2021 Taxable Wage Base 2022 Taxable Wage Base Percentage Increase
CO $13,600 $17,000 25%
IA $32,400 $34,800 7%
NV $33,400 $36,600 9.5%
NY $11,800 $12,000 1%
WA $56,500 $62,500 10%

Increasing Tax Rate Tables

In a period of depleting trust funds, it is common for states to increase their tax rates to generate more revenue and thus, replenish their trust funds.  This is obviously not a popular method for employers as it increases their state unemployment expenses via higher taxes.  With the COVID-19 pandemic accelerating the exhaustion of these trust funds, we expect to see states resort to this moving forward.

To date, we have confirmed that at least 2 states whose tax rates are effective on a fiscal year basis (July 1 thru June 30) will be increasing their tax rate tables (New Jersey & Vermont).  We fully expect this trend to continue into the fall and winter as the remaining states are calculating tax rates and issuing notices.

One interesting point to mention is that most states have indexed their tax rate schedules to correlate with the current level of the state trust fund.  This is similar to the indexing of taxable wages to the average wage we mentioned when discussing taxable wage limitations.  By having the tax rate schedule indexed to the trust fund level, it creates an economic trigger that drive these factors up or down rather than arbitrarily increasing and decreasing them via political or public opinion.

Special Assessments

Some states are trying to build back their Trust Fund balances by assessing a special COVID assessment or other assessments that are triggered when certain conditions are met in the state’s Trust Fund. For example:

  • Massachusetts created a COVID-19 Recovery account and moved all COVID related charges to that account. The state will charge all experience rated employers an assessment equal to 10.5% of their corresponding UI rate beginning January 1, 2021. This assessment ranges from $14.85 (0.099%) to $226.35 (1.509%) additional per employee.
  • Minnesota applies a 4% assessment to the amount that is due for a Federal Loan Interest Assessment to pay the interest on the Title XII loans that MN took to replenish their trust fund balance when it reached a certain level.

Many states took actions to keep rates low in 2021 to aid in the recovery efforts but the Trust Fund Balances will need to be replenished.  We expect to see more states use Special Assessments going forward to evenly distribute the replenishment of the Trust Fund balances.

That’s the end of the third episode!  As we wrap up our September series next week, we will summarize this information and answer the lingering question: What can I do as an employer?  Tune in next Tuesday (9/28) for the series finale!

Episode Four – to be posted 9/28/21

UI Modernization Plans

When the COVID-19 pandemic hit in March of 2020, and employers across the U.S. started to shut down their businesses to limit the spread of the disease, it became quickly apparent that the State Workforce Agencies were not prepared for the influx of unemployment claims. Due to outdated systems and tremendous volumes, the states struggled to quickly make the changes needed to support federal programs enacted to help those who found themselves out of work due to the pandemic. States were thwarted in their efforts to get crucial benefits to impacted workers by outdated technology and a lack of resources after years of record low unemployment.  The same outdated technology and urgency to payout benefits made the states vulnerable to fraud from international and local crime rings. When adding all the challenges together, this made it difficult for states to deliver benefits to unemployed workers quickly and equitably. Even as economic conditions have improved, states continue to face significant backlogs that have delayed benefits to workers and have struggled to address fraud perpetrated by sophisticated crime rings that are continuing to use new techniques to attack UI systems.

The U.S. Department of Labor recently announced details on how they plan to assist State Workforce Agencies in addressing these critical issues. While the core of these challenges will need to be addressed through comprehensive UI reform, the USDOL aims to address the most acute challenges states have faced over the last year with $2B allocated as a part of the American Rescue Plan Act (ARPA).

American Rescue Plan Act Unemployment Insurance Funding

The American Rescue Plan Act grants broad authority to the Department of Labor to help states address these challenges by using $2 Billion to:

  • prevent and detect fraud,
  • promote equitable access,
  • and ensure timely payment of benefits.

These funds will be used to address common problems facing the system in the short-term “while also working to address long-term challenges by improving state processes and building a modern, modular IT system that will make the UI system easier to access, better prepared to prevent fraud, and more resilient to prepare for future surges in initial claims.” The USDOL has outlined a plan to spend the funding by focusing on 4 key areas to address systemic deficiencies in access based on proven strategies:

Direct assistance to the states through “Tiger Teams”:

Preventing and detecting fraud, promoting equitable access to benefits, and eliminating backlogs and ensuring timely payments are challenges that all states are facing to some degree. The USDOL is going to address these challenges by sending experts to the state to work hand-in-hand to find solutions. Deploying team resources directly to the states will help them zero in on what’s working and should be shared and what’s not and should be addressed. These “Tiger Teams” have been deployed into an initial six states on a voluntary basis – Colorado, Kansas, Nevada, Virginia, Washington, and Wisconsin – to help identify process improvements that can speed benefit delivery, address equity, and fight fraud. The department will expand the Tiger Team supports to additional states throughout the year.

Tools to states to help address immediate fraud concerns by facilitating more effective ID verification:

The past year has shown that the nature of fraudulent activity in UI will continue to be highly dynamic and states will require additional support and continuous monitoring for evolving threats. The department plans to take a more active role in helping states improve their identification verification processes by making identification services available to states to purchase. The hope is that these services will cut down on fraud which is contributing to large backlogs and the stealing of benefits that workers need.

Developing IT solutions to modernize antiquated state technology by centrally developing open, modular technology solutions that can be adopted by states as needed:

The pandemic has only underscored the desperate need for technological support and improvements. Many state systems are operating on outdated technology, which made it difficult for them to respond rapidly to changes in law and economic conditions. The solution proposed will develop open, modular technology solutions that states may adopt as part of ongoing modernization and improvement efforts. The USDOL hopes to provide software that can be adopted by the states to support end-to-end administration of UI, including benefit delivery, employer tools and appeals.

Providing direct grants to states to promote timeliness and equity and fight fraud:

According to the USDOL, “States lack the resources they need to manage the current volume of claims quickly, accurately and equitably. As a result, far too many workers, underrepresented populations, those with limited English proficiency, or low-income claimants face barriers in accessing unemployment insurance. To address that challenge, the department plans to make $700 million in grants to states available to promote equity and fight fraud.”

These modernization efforts will be the first step in overhauling the UI System. Thomas & Company is monitoring the plans for modernization and we will continue to engage with the USDOL and states to make sure that your voice is heard on changes that may impact you and your employees.  For more information on the UI Modernization plan, please visit https://oui.doleta.gov/unemploy/pdf/FactSheet_UImodernization.pdf

Iowa Unemployment Tax Rates Hold Steady for 2022

Governor Kim Reynolds announced that unemployment insurance tax rates for Iowa employers will remain unchanged for 2022 in a press release by the Iowa Workforce Development Department.

Effective for 2022, unchanged from 2021, tax rates will be calculated using Tax Table 7, with total tax rates for experience-rated employers ranging from 0.00% to 7.50%.  Additionally, the total tax rate for new non-construction employers will be 1.00% and the total tax rate for new construction employers will be 7.50%.

“Remaining in Tax Table 7 ensures Iowa businesses will continue to recover from the pandemic without facing additional costs,” Townsend said. “And like employers, we are working hard to make sure they have the skilled workforce they need to continue their recovery.”

Iowa law requires Iowa Workforce Development to establish a table to determine the unemployment tax rates that will impact eligible employers each year. The unemployment insurance rate table trigger is derived from a formula based primarily on the balance in Iowa’s unemployment insurance trust fund, unemployment benefit history, and covered wage growth. Based on this formula, contribution rates will continue to be drawn from Table 7 (out of eight possible tables) in calendar 2022.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.