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Natural Disasters and Unemployment-The Effect on your Tax Rate

 

Wild fires, hurricanes, earthquakes, flooding.  What do all of these events have in common? They are natural disasters. We are seeing them across the United States right now.

Whether it is a forest fire, flooding or hurricane; natural disasters will affect many employees in many different industries.  And what happens when industries have to stop business due to these disasters? Employees need unemployment.

In most states, the former employee will be found eligible for unemployment benefits because the employee has been separated through no fault of their own.  The allowance of benefits is only reasonable as long as the former employee is able, available and actively seeking to return to work.

For employees who are not deemed eligible under their states unemployment program the federal government does provide for them under the Disaster Unemployment Assistance (DUA).  The Disaster Relief Act of 1974 authorizes the President to provide to any individual unemployed as a result of a major natural disaster such assistance as deemed appropriate while the individual is unemployed. In general, individuals living or working in those areas affected by a major natural disaster, who are unemployed because of the disaster, are eligible for DUA if they are not eligible for UC or other wage replacement payments and meet certain requirements. Assistance is available for a maximum of 26 weeks after the major natural disaster is declared. (1)

We are fortunate that many states have taken precautions to insure there are clear guidelines for handling the  unemployment claims received during these unfortunate events. Typically, these are states that have had natural disaster issues in the past and are protecting both the employer and the employee should the issue arise again in the future.

For employers, while we want to insure our former employees are being taken care of, we also have a concern about how our business is going to be affected by the disaster.  Unfortunately, unemployment will be one of those concerns.  There are a number of states that have taken steps to insure that while the former employee is allowed benefits after the natural disaster, the employer is not penalized for events that were beyond their control.

The following states grant the employer noncharging or relief of benefit charges for employees who are collecting benefits as a result of a natural disaster.  In most of the states, the natural disaster must be declared by the President of the United States of America.

RBC.NaturalDisaster.2017

 

Employers are fortunate that so many states have taken steps up front to insure employers are not affected by natural disaster. This eliminates the burden the employer would have to add to an already difficult period for their business.  We have seen that retroactive assistance can be offered by the state agency to alleviate the burden employers may face.  An example of this is the occurred in Vermont.  The Vermont Legislature passed legislation to provide partial State Unemployment Tax Act (SUTA) relief to Vermont employers impacted by the federally declared disasters of 2011 (i.e. the April and May 2011 flooding events, and Hurricane Irene in August 2011).  They gave employers until June 10, 2013 to file for the credit in an effort to stimulate the Vermont economy.

It is important to note that employers should not rely on the retroactive credits in determining the effect unemployment will have after the natural disaster.  As well, it is unfortunate to note, but there are very few states that grant relief of benefit charge to nonprofit employers such as school districts, governmental agencies and 501 (c)3 organizations.

If you have additional questions or comments, please contact your CCC Account Executive.


Unemployment Tax Update:

Leave Money on the Table?

money-on-the-tableEmployers leave millions every year on the table with overstated FICA, FUTA and SUTA taxes.    When a merger, reorganization, spin off or any transaction moving individuals from one FEIN to another FEIN, the number one goal is to get them on the payroll so they can be paid.  This can be tedious as each person’s information must be manually entered the first time.   Then the benefits the employees will receive are the next point of concern.

Eventually, the taxes are calculated, filed and paid.    This is where huge overpayments in this area of FICA, FUTA and SUTA occur.  In almost all instances, the FICA and FUTA taxable wage base can be continued by the successor employer reducing the taxable payroll reported.    The dollars represented by FICA only apply to the high wage earners but can lead to substantial overstatements of taxable income for the employer and employee.  The FUTA, although the base is $7000 across the board, can also lead to substantial overstated taxable wages and overpaid contributions.  Before the FUTA can be amended, the state agencies must have their records in order.

With the SUTA Dumping Legislation of 2004, all transactions or movement of employees need reported.   In many instances, the transfers of experience are mandatory if the predecessor (or prior) employer no longer has employees.   If the predecessor will continue employment, the rules change a bit and the transfer of experience is either optional, mandatory or not permitted.  Once the transaction is determined either a partial or total, a review of the taxable wage base becomes important.

Over half the state unemployment agencies will allow the continuation of the taxable wage base for employees who were moved to another entity during the year if the transaction is deemed a partial but with total acquisitions, the wage base can transfer in almost all fifty states with the exception of only a few states.  The deadline to file amended quarterly contributions is three years from the effective date.    Corporate Cost Control can recover overpayments in the area of FICA, FUTA and SUTA.   Please contact our tax director,  Norma Green, at (800) 207-6926, Ext. 418 or ngreen@corporatecostcontrol.com.


Guideline

Relief of Charge – Nonprofits

money in hand

All employers, except for religious organizations pay into the unemployment system.  These employers are either for profit businesses or not-for-profit or reimbursable employers.  CCC works with both of these employers.

Nonprofit or Reimbursable employers receive the benefit of paying dollar for dollar to reimburse the state unemployment agencies for benefits paid to their former employees.  This typically results in most states not allowing these types of employers to request relief of benefit charge for base period claims.

Pennsylvania used to be the only state that granted a nonprofit employer the ability to request relief of benefit charge for certain claims.  These states are currently:

The various reasons that relief can be granted vary in these states. Be sure to communicate the appropriate reason for separation to your CCC Claims Analyst, to insure your organization is paying the minimum in unemployment costs.

 

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