Florida Unemployment Tax Insanity (2)

I previously wrote about Florida Unemployment Tax Insanity. This Florida Unemployment Tax Insanity letter, to Florida Governor Crist, is four pages with narrow margins. The total Florida Unemployment Tax Insanity package. to our Department of Revenue, was about 50 pages. So if you want to help appeal, repeal or litigate the Florida Unemployment Tax Insanity, or have a Tax Cut CPA, to really fight these and other outrageous taxes for you, please let me know.

MICHAEL BLOCK CPA

14 E Oakland Park Blvd

Fort Lauderdale, FL 33334

 

 (954) 566-7540, FAX 566-7541

October 26, 2009

The Honorable Governor

    Mr. Charlie Crist

PL-05, The Capitol

Tallahassee, FL 32399-0001

Re: Florida Unemployment Tax Insanity

    2,600% tax increases, unconstitutional penalties and interest.

I wrote to you about Florida Unemployment Tax Insanity on April 9 (attached A).

Many years ago, in only six weeks, you created a lifetime supporter by turning a Senate Committee 13-2 vote (for a useless container tax) into a 14-1 rejection. You may not recall our Trojan horse, but you courteously accepted petitions and closely listened to long arguments from supporters and me. That tax made small stores, with local suppliers, not competitive with large ones (due to paperwork and suppliers claiming unverifiable out-of-state recycling). The approach that got you a #1 Cato Institute rating also should make you recoil from 2,600% tax increases.

 

James Evers (Evers), Department of Revenue (DOR), Director, General Tax Administration, sent me a good response on June 2 (attached B), but could solve nothing. Other good employees helped. My Florida Unemployment Tax Insanity blog article (http://ow.ly/vgNc) appeared on September 6. A web search then had around 7,000 links to these words. Yahoo now has 278,000 such links, with my posts first (except for a malware site).

The key Florida Unemployment Tax Insanity relates to outrageous penalties, hiding as 2,600% tax increases. In almost 50 years in public accounting, with occasional clients in most states, there was only one way to calculate unemployment tax rates. Add a base rate to an experience rate for each employer. Experience rates reflect unemployment tax collected on an employer account, versus unemployment benefits paid on it. Recent combined Florida rates have been 0.2% to 5.4%. Low rates are important during hard economic times. Responsible employers get them by keeping employees, so unemployment benefits are low. The new insanity damages the best employers, by raising all rates to 5.4%. It has little or no effect on the worst employees, who hire and fire indiscriminately, as rates are already at or close to 5.4%.

Here is how DOR hides these 2,600% tax increases. Near the end of each year, employers get standard notices advising them of their new combined Unemployment rate for the next year. Few employers question accountants about this. For example, we often say there is no use arguing this mechanical computation, when the only change can be to the already final unemployment benefits.

Now, however, it takes one unpaid bill, or one unresolved missing return notice, on one unknown date, to change experience rates. All rates affected become 5.4% for a full year. For the many employers, who otherwise had 0.2% rates, the 5.4% rate is a 2,600% increase. It applies to the first $7,000 or wages, so the tax goes from $14 to $378 per employee.

DOR balance due or missing return notices seem wrong or waived more than 90% of the time. Any litigation will ask the court to take judicial notice of prior extraordinary DOR incompetence. We had to file SEVEN sets of duplicate returns (for around SEVEN clients) for one 2007 quarter alone. Most originals and duplicates went certified mail (return receipt, combined). I also personally gave a set with an experienced Coral Springs DOR agent. Nothing helped. The agent said she was leaving soon due to terrible Unemployment system problems. A letter to the Governor and a call from a senior Tallahassee DOR supervisor let us fax a set. He agreed to accept all returns as timely filed, waiving all penalties and interest and refunding penalty payments made. Fortunately, he gave me his name and number, as two months later all clients got new penalty notices for this SAME quarter!

Multiply this disaster by what happens with DOR almost every quarter and you will know why these small payroll clients can only pay me a tiny fraction of the value of the time we spend. It is Florida Unemployment Tax Insanity for me to spend $7,000+ more unpaid time on this letter and a few related notices alone, but that is what it took. Therefore, it is patently outrageous for Florida to use its notoriously ineffective return processing system as a basis for hidden taxes and penalties of up to 2,600%.

Under the fourteenth amendment to the U.S. Constitution, no State shall deprive one of property without due process, or deny equal protection of law. Valid notices do not hide big penalties as 2,600% tax increases. Therefore, concealing the reason for the increase makes such notices legally invalid. There can be no defense or tolling of a statute of limitations in such cases. This also violates federal equal protection. It does not matter if it applies to those with 0.2% rates, 5.2% rates, or anything between. Increasing all rates to a 5.4% rate means one offense gives some 5.2% rate increases and others no rate increase, with many between these amounts. Zero to 2,600% tax increases are not equal protection for the same offense. It also does not matter if notices are outstanding for two days or 11 months. It only matters if they are outstanding on one date. This too is not equal protection. A federal Civil Rights Act class action suit, with an emergency temporary restraining order, should make Florida pay legal fees and costs.

 

The 2,600% increase probably violates one other federal law. The federal government partly funds Florida unemployment benefits. It is likely that that formula depends on the tax Florida charges. It is unlikely it contemplates 2,600% increases based on paperwork. This may cost Florida far more than these outrageous hidden tax / penalty increases. It may cost substantial federal funds.

DOR compounds these outrageous hidden penalty taxes with more newly enacted penalties. How can a system generating massive erroneous paperwork get better by adding more?

 

Evers mentions having local personnel process returns and payments. That will be good, as locally filed returns and payments are now in limbo for months. Final bills also rarely match local agreements. Did my prior letter help stop the ridiculous local use of automatic dialers? They left messages telling us to call, with no client name, tax period or unemployment number.  Local agents did not know the company, even if called at once. Then they add penalties and file liens, since one “calls back.” Please stop this.

 

The electronic filing and payment Evers mentions is good, but NOT for those with less than ten employees. Despite this, DOR notices improperly say DOR did not get EFT (Electronic Funds Transfer) payments or E-file. Many notices also impose penalties for not filing or paying electronically on a company with nine employees. Half of all returns are still paper, so such EFT notices are insanity.

 

Evers checked E-filing status for companies on my schedule attached (updated C), but did not detail Florida E-file numbers and other changes on a schedule previously sent and now updated. We urgently need this for current returns. We also sent Minutes for all companies (D). They make me a Vice President. It is insanity for DOR employees to say one must be in the Secretary of State Sunbiz database to be an officer. Secretary of State instructions say, at https://efile.sunbiz.orgsbs_ar_instr.html “Step 10: You may list up to six (6) principals (i.e., officers, directors, managers, managing members, etc.) on our computer database… At least 1 principal must be provided (FS Sec 607).”

Evers and other DOR employees also did not change company addresses, after two years of Forms UCT6 and correspondence with only my address. This probably resulted in many missing return notices. Form DR1does not require a new DR1 to report address changes. We need not use corresponding Internal Revenue Forms 8822 to change addresses if we file returns with a new address. As a result, all DOR notices were invalid because it did not send them to this last known address. Accordingly, no notice tolled a statute of limitations on appeals, so we can still contest all assessments and notices. Likewise, DOR cannot legally file or enforce liens. DOR should promptly change all company addresses to my address.

Attached are the private details of recent pending Unemployment tax notices (attached E). I trust some good DOR employee will correct DOR records for these notices.

Governor (most respectfully and affectionately), YOUR DOR SYSTEM creates Florida Unemployment Tax Insanity. No one I spoke to even knew about the 2,600% tax increase. It shocks and outrages all who understand. A Census Bureau table tells me you can cut DOR paperwork, delays and costs, on 300,000 returns and notices a year, by letting those who only pay once per year not file quarters without payroll. You can do this without legislation or Internal Revenue approval.

Even my non-payroll clients will get copies of this letter and related material. We will do everything possible to insure many clients and non-clients consider this when voting and making political contributions. My websites, blogs and Twitter posts have around 50,000+ page views a month. Close friends have many millions more page views. Even without this readership, millions of my tax limit petitions once helped me change Florida law and our Constitution. They let me personally successfully argue a petition before the Florida Supreme Court and win election to the Port Everglades Commission (gave my salary back and never let a lobbyist buy me lunch).

This means that a Constitutional petition and lawsuit will soon add publicity if this letter, plus visits to the Senators and Representatives below, does not help.

Sincerely yours,

Michael Block

cc: James Evers, Florida Department of Revenue, Tallahassee
  Paul Stewart, Florida Department of Revenue, Coral Springs, 954-346-2822
  Sen. Chris Smith, #29, 954-267-2116
  Sen. Jeremy Ring (tax / finance committee), 954-917-1394
  Rep Perry Thurston, #93,
  Rep. Ellyn Bogdanoff (tax / finance committee) 954-762-3759

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Also see Florida Unemployment Tax Insanity #3