Unemployment Tax Rate Notices – Always Be Sure to Audit!

Most employers have received their tax rate notices by now.  Many of you are nearly over your “sticker shock” from the increases to your rate (or it did not go down as expected).  Before you start making allocations in your accounting for this year’s unemployment expense, make sure you take the time to audit the numbers on your notice(s).  “Why” you might ask?  Because surprise, surprise - state unemployment agencies sometimes make mistakes – and if you do not catch them– you are the one paying!

Let me give you some examples of mistakes that I have come across in my years working with unemployment. 

• In 2013, I was contacted by a client when they became upset that their tax rate had increased, but they felt they had performed better in managing their UI than in past years.  They were looking for answers as to why the increase.  As I began to dig into the numbers, I realized that this state agency had accidently overstated both the client’s net unemployment charges and gross wages which led to a significantly higher overall UI Tax rate.  To make a long story short, had these mistakes not been discovered, they would have been charged almost $400,000.00 more in unemployment taxes than they should have paid.
• In 2015, I spoke with an employer who was trying to fix a mistake made on their tax rate notice for that year.  It was the actual calculation that was wrong.  We discovered that the state agency software was pumping out incorrect calculations and overstating the employer UI Tax rates for that year.  
• An employer contacted me this year to look into their UI Tax rate for 2017.  They had no claims during the tax rate year (July 1 2015 to June 30 2016 for that state) and they felt that the rate was too high.  After investigating the situation, it was discovered that over the course of the previous 2 years, 2 quarterly tax payments had not been entered correctly (the amount entered was significantly lower than what was actually paid).  This led to a higher tax rate than they should have received.

These are just a few examples of errors that I have encountered.  The State UI Agencies service tens of thousands of employers every year and they cannot be expected to be perfect, but as an employer you must be diligent in auditing the numbers you get from these agencies so you are not paying more than you should.

My advice to all of you is to keep accurate records of your net unemployment charges, payroll taxes (taxable and gross depending on the state) and make sure that the numbers on the state notice match yours.  Then take the time to go through the state’s calculations to ensure they did not make a mistake that will cost you money!

For more information visit us on the web at www.UnemploymentTracker.com