Category

Tax Implications

COVID-19 and Future Unemployment Tax Rates

As we all experienced in one way or another, many state unemployment agencies had difficulty managing the drastic increases in unemployment compensation claims arising from the COVID-19 pandemic. Just as state agencies are catching up with UI benefit payment issues, many are also having difficulty matching benefit charges with employer’s accounts. The additional $600 payment required under Section 2104 of the CARES Act and the state by state emergency orders issued for “non-charging” of employer accounts have created additional challenges in this regard and provided little time for state agencies to make changes in their systems to accommodate employers.

State unemployment taxes in 2021 and 2022 are likely to increase, whether it be due to individual employer’s experience history or a depletion in state unemployment trust funds. Regardless, employers and state agencies should be careful in reviewing charges to employer accounts to ensure compliance with federal and state laws.

In most states, contribution rates for 2021 are based on unemployment claims filed and benefits payments for the one-year period ending June 30, 2020. State agencies are now faced with the difficult task of reconciling the benefits paid with employer account charges identified for COVID-19-related claim payments. State unemployment compensation charge statements should be closely reviewed with respect to a number of questions related to federal and state laws and special COVID-19 related provisions, including but not limited to:

  1. The extra $600 paid as Federal Pandemic Unemployment Compensation (FPUC) under Section 2104 of the CARES Act should not be charged to employer accounts. This applies not only to the most recent separating employer accounts but also to non-separating base period only chargeable accounts. The $600 charge may not show up as a separate charge but may be included in total charges.
  2. Employer accounts should not be charged for unemployment compensation related to COVID-19 as provided in Executive Orders from Governors and/or state legislative bodies adopted to provide relief from COVID-19 related unemployment claims.

Requests for relief of charges should be submitted in a timely manner to state agencies to enable corrections to be made as early as possible and thereby avoid long-term impacts on future tax rate calculations.

Additionally, contribution rates for 2021 that are typically released between November & February should be reviewed for timely appeal. In the event that any discrepancy is identified, an issue should be raised immediately to avoid erroneous factors used in tax rate assignment.

Unfortunately, the delay in payment of unemployment compensation and the complex programming required for proper charging of employer accounts may take time to sort out by state agencies. Even if there is non-charging of benefits to individual employer accounts due to COVID-19, there may also be increases in 2021 and 2022 due to the impact of lower average payroll used to determine rates. The extent of additional taxes for 2021 may not be determined until the end of 2020. Employers and states should be working through these details to assure that the appropriate charges, payments and contribution rates are determined under the applicable laws.

The last point to consider relates to additional increases in UI taxes specifically relating to federal unemployment taxes (FUTA). Many state UI trust funds have been depleted and this may trigger solvency tax increases and interest on Title XII federal loans in years to come. Our office is monitoring this matter, as we did during The Great Recession, and will continue to provide updates on this as they become available.

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

Wisconsin To Waive Unemployment Benefit Charges

The Wisconsin Department of Workforce Development has announced that it will not include unemployment benefits charged from March 15, 2020 to June 30, 2020 when calculating employer’s unemployment tax rates for 2021.

Under Emergency Rule 2018, published June 29th in the state administrative register, the Department is to assume that all benefits charged from March 15 to June 30 are related to the COVID-19 pandemic for purposes of calculating 2021 tax rates.

The calculation of an employer’s 2021 tax rate generally would include benefits charged up to June 30, 2020, but Wisconsin Act 185 signed in April requires virus-related benefits to be charged to the state unemployment balancing account instead of to individual employers.

The Department has indicated that redirecting the charges from employer’s accounts to the general balancing account will have to be completed manually and is expected to take thousands of hours. The process is not completed by June 30th because of the high volume of benefit claims, so the rule is to allow the Department to avoid charging employers for virus-related benefits in 2021.

As always, if there are any questions please do not hesitate to contact us or visit our website at https://thomas-and-company.com/news/.

Washington Unemployment Taxable Wage Base to Rise in 2021

The Washington Department of Employment Security announced today that the unemployment taxable wage base is set to rise to $56,500 in 2021, up from $52,700 in 2020.

The change to the taxable wage base takes effect Jan. 1, 2021.

The Department’s unemployment tax rates for 2021 are expected to be finalized in December.

 

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

COVID-19 & Hawaii Unemployment Tax Payment Extension

Hawaii’s deadline for submitting first-quarter unemployment tax payments will be extended, the Hawaii Department of Labor & Industrial Relations announced today.

Unemployment tax and wage reports will remain due on April 30, 2020 as normal, but the Department is allowing for an extension to submit the tax payment until May 31, 2020.

The Department stated that the deadline for unemployment tax payments was moved to May 31st  to assist employers during the COVID-19 pandemic.

 

Our office will be monitoring these situations closely and will send out additional announcements or make postings on our website (https://thomas-and-company.com/covid-19/) as we become aware of new developments.

COVID-19 & Arizona Unemployment Tax Filing & Payment Extension

The Arizona Department of Economic Security has provided a 30-day extension for quarterly state unemployment tax filings and/or payments.

The Department announced that the deadline for employers to submit their first quarter 2020 unemployment tax returns and payments has been moved from April 30th to June 1st as a direct result of the COVID-19 crisis.

Our office will be monitoring these situations closely and will send out additional announcements or make postings on our website (https://thomas-and-company.com/covid-19/) as we become aware of new developments.

 

Alaska Unemployment Tax Relief Amidst COVID-19 Pandemic

Alaska employers affected by the COVID-19 outbreak may receive unemployment tax relief under an emergency rule that took effect April 6, 2020.

Under the rule, employers may request that the Alaska Department of Labor and Workforce Development adjust fluctuations in payroll that are directly related to the spread of COVID-19.

Alaska is the only state that utilizes the decline quotient method when calculating unemployment tax rates, which takes into account when wages paid to employees decrease from one quarter to the next. Employers generally may request adjustments to the calculation using an employer option form.

Adjusted fluctuations must occur during the emergency declaration period, which was enacted March 11, 2020 by Gov. Mike Dunleavy.

Additionally, the rule requires employers to provide former employees with information about unemployment benefits within seven of the employee’s last days of work.

Our office will be monitoring these situations closely and will send out additional announcements or make postings on our website (https://thomas-and-company.com/covid-19/) as we become aware of new developments.

COVID-19 & Iowa Unemployment Tax Payment Extension

Governor Kim Reynolds has approved a measure extending the deadline for submitting first-quarter unemployment tax payments to July31, 2020, the Iowa Department of Workforce Development announced today.  However, the extension will only apply to employers with 50 or fewer employees.  Eligible employers also must be in good standing with no delinquencies in quarterly payments.

Unemployment tax and wage reports will remain due on April 30, 2020 as normal, but the Department is allowing for an extension to submit the tax payment until July 31, 2020.

To qualify for the extension, the employer must be current on all quarterly tax payments before the 1st quarter of 2020 regardless of whether or not they are seeking an extension of tax payment. All employers must file Quarterly Employers Contribution and Payroll Report electronically by 4:30 on April 24th to avoid late report filing penalty.

Payments for Q1 would be due when Q2 payments are due; July 31, 2020.  No interest or penalties will accrue for delayed payments for the eligible group.  The extension of payment deadline without interest is not a holiday or forgiveness and the taxes will be due July 31, 2020.  Employers still need to file their quarterly reports, which contain employee wage data necessary to compute benefit eligibility and amounts to be paid.

For an employer who elects to take advantage of the extension, please contact the IA DWD  Tax division at either 1-888-848-7442 or by sending an email to Q1tax@iwd.iowa.gov.  The DWD recommends sending an email versus a phone call as there is a high call volume during this time that may lead to extended wait times.  Employers must notify the DWD of intent to delay payment by Friday, April 24th at 4:30 pm.

Our office will be monitoring these situations closely and will send out additional announcements or make postings on our website (https://thomas-and-company.com/covid-19/) as we become aware of new developments.

COVID-19 & Puerto Rico Unemployment Tax Filing & Payment Extension

The Puerto Rico Department of Labor & Human Resources has provided a 60-day extension for quarterly state unemployment tax filings and/or payments.

The Department announced that the deadline for employers to submit their first quarter 2020 unemployment tax returns and payments has been moved from April 30th to June 30th as a direct result of the COVID-19 crisis.

Our office will be monitoring these situations closely and will send out additional announcements or make postings on our website (https://thomas-and-company.com/covid-19/) as we become aware of new developments.

COVID-19 & Texas Unemployment Tax Filing & Payment Extension

The Texas Workforce Commission has provided a 15-day extension for quarterly state unemployment tax filings and/or payments.

The Commission announced that the deadline for employers to submit their first quarter 2020 unemployment tax returns and payments has been moved from April 30th to May 15th as a direct result of the COVID-19 crisis.

More information is available on the TWC’s website here.

Our office will be monitoring these situations closely and will send out additional announcements or make postings on our website (https://thomas-and-company.com/covid-19/) as we become aware of new developments.

COVID-19 and Maryland Unemployment Tax Payment Extension

Maryland’s deadline for submitting first-quarter unemployment tax payments will be extended, the Maryland Department of Labor, Licensing & Regulation announced today.

Unemployment tax and wage reports will remain due on April 30, 2020 as normal, but the Department is allowing for an extension to submit the tax payment until June 1, 2020.

The Department stated that the deadline for unemployment tax payments was moved to June 1st  to assist employers during the COVID-19 pandemic.

Our office will be monitoring these situations closely and will send out additional announcements or make postings on our website (https://thomas-and-company.com/covid-19/) as we become aware of new developments.