CUTTING BACK: Employers taxed by new levies, Florida Unemployment Tax Insanity

CUTTING BACK: Employers taxed by new levies is an excellent story by Jennifer Robinson. She tells about Nevada nearly doubling payroll taxes on companies with more than $250,000 in annual payroll, from 0.63 percent to 1.17 percent of payroll. The Florida Unemployment Tax Insanity is far worse, with tax rates increasing from as little as 0.02% to 5.4% for the MOST stable deserving employers. Few small business owners even know that this is the cause of their big tax increases. The Florida Unemployment Tax Insanity also features ridiculous extra amounts in penalties and interest, harrassing phone calls, extra and premature credit-killing liens.

States have long set unemployment tax rates using a low rate all employers pay, plus an experience rate. They base experience rates on the ratio of the tax an employer pays and the unenemployment benefits the state pays for that employer. In Florida, this can mean a total unemplyment tax rate of 0.01% to 4.20%. It takes a long time, with no unemployment benefits, to get a 0.10% to 0.20% tax rate. However, Florida now increases even the lowest rate to the 4.20% maximum if an employer has even one tax notice outstanding when it sets their new rate.

Mike Block is a Fort Lauderdale.CPA and a former elected offical, with more than 40 years of tax experience involving 30+ states. He calls this the Florida Unemployment Tax Insanity for many reasons, including a system that seems to work hard to create the maximun possible tax notices. For example, Florida does not consider unemployment tax returns filed from new addresses. It sends penalty notices and liens to old addresses and calls old phone numbers, long after receiving many new returns with new addresses, even if you file by certified mail with return receipts. Block says this makes employers not get the notices legally required in time for filing appeals, increasing the number of notices and depriving them of the due process of law required by the federal constitution. Many of these penalty notices also refer to returns not received by electronic filing, when such filing is not required for small employers.

The Florida Unemployment Tax Insanity even involves tax notices and calls from state tax agents for returns not yet due, even when there is a history of no tax being due. Florida also seems to lose about half of Block's timely-filed zero-tax unemployment returns, even if filed by certified mail, return receipt requested. This made Block often improperly pay a dollar with each return, for extra proof of filig. Florida compounds problems by taking more than two months to process many unemployment tax returns. There is no record of filing during this period, even with receipts for hand delivery of returns to local tax agents. Local offices do not keep searchable records of filings. When Block talked to a senior state unemployment tax offical, after the offical got a seventh set of missing returns, the official waived all penalties and interest. However, state computers sent new penalty notices two months later. The two month processing lag and new penalty surcharges can increase the amount of penalties and interest, creating new outstanding tax notices, many months after full payment.

The Florida Unemployment Tax Insanity may even improperly affect federal government subsidies of state unemployment benefits. Block does not believe federal laws consider these punitive state tax increases, basing extra tax on outstanding notices may be improperly affect the Florida share of federal government revenue. These problems cost him more than $1,000 per client per year, in time for which he cannot bill. Block, therefore, plans to file a class action suit if he cannot resolve this.