During a merger or acquisition, it is important to collect as much historical information and documentation as possible from the predecessor employer. Because states require this information when reporting mergers, acquisitions, internal reorganizations, etc., obtaining information up front will allow you to remain in compliance and ensure a smooth transition.
What Documents Do I Need?
The following documents are commonly required to report a transaction (depending on the type of transaction):
- Purchase Agreement(s)
- Merger Documents
- Legal M&A Documentation
- Pre- and Post-Acquisition Organizational Charts
- State Unemployment Insurance (SUI) Account Numbers (Predecessor and Successor)
- State Income Tax (SIT) Account Numbers (Predecessor and Successor)
- Local Income Tax (LIT) Account Numbers (Predecessor and Successor)
- SUI Tax Rates
- Officer Listings
Additional documents may also be required, including:
- SUI Returns
- Tax Filings (Predecessor and Successor)
- Work Locations (Including Residential Addresses)
If appropriate documentation is not provided, the state may deny the SUI experience transfer and require the predecessor to continue filing SUI returns and paying related taxes. Furthermore, there could be fines and penalties associated with additional payroll tax related non-compliance.
Additional Documents
Collecting as much information and documentation as possible from the predecessor will help ensure needed information is available not just for the transaction reporting but for relevant business needs after the transaction has closed.
Maintaining a due diligence checklist will help you remember what documents to request from the predecessor during the transaction.
- Pre- and post-acquisition org charts
- The last three years of Forms 940, 941, W-2s, and W-3s
- SUI returns for the past three years
- Current and prior three years of SUI rate notices
- Tax clearance letters for each tax type
- IRS, state, and local tax notices from the past two years
- Year-to-date SUI and social security employee-level detail from January 1 to acquisition date
- Predecessor annual W-2 returns for transferred employees, specifically the higher paid employees who, based on annual rate of pay, surpassed the annual social security taxable wage limit for the entire year in which the transfer occurred
- IRS transcripts for Forms 940 and 941
- Confirmation of whether the predecessor claimed the Employee Retention Credit (ERC)
- Confirmation of whether the predecessor deferred payment of the employer portion of SS and RRTA taxes that would otherwise be due from March 27 to December 31, 2020, as a result of the COVID acts in place
The Thomas & Company Difference
Our dedicated team of M&A experts understands the nuanced dynamics of these transformative deals. With 100+ years of experience and an eye for detail, we are ready to work with your team to maximize the value and potential of your business transaction(s). Our approach is tailored to align with your unique business needs, ensuring that each transaction enables your company’s success.
Thomas & Company works with our clients to ensure they have the appropriate information and documentation to report all transactions to the state agency. Our tax analysts can use this documentation to perform a state unemployment tax rate analysis to determine the potential financial impact of SUI tax rate changes under the successor entity.
Contact us at [email protected] to learn more about how Thomas & Company can enable your success!
How Does This Impact My Organization as a Whole?
Beyond statutory compliance and its importance for the long-term financial well-being of your organization, mergers and acquisitions can have major implications throughout your organization, impacting countless departments and processes.
Don’t forget to check back over the coming weeks as we continue to analyze how mergers and acquisitions impact all facets of your organization so you can be ready to take action!
- Employment and Wage Verification
- Unemployment Cost Management
- Tax Credits & Incentives
- Offboarding Compliance (State Separation Notices)
- I-9
