April 1, 2016 Taxes en_US Every year companies over-pay their unemployment insurance taxes. Find out what you need to do to protect your business while still being fair to employees. https://quickbooks.intuit.com/cas/dam/IMAGE/A3tvjHchw/3deb57af1fa9ef3f5078b410f5c9e9b5.jpg https://quickbooks.intuit.com/r/taxes/overpaying-unemployment-insurance-taxes Are You Overpaying Your Unemployment Insurance Taxes?

Are You Overpaying Your Unemployment Insurance Taxes?

By QuickBooks April 1, 2016

Avoid Overpaying with Careful Documentation

Every year, Illinois collects an excess of $5,500,000 worth of unemployment insurance from companies over what they should. That excess would likely not be paid if these companies were better prepared and more diligent when contesting fraudulent or spurious unemployment benefit claims. As a result, if the benefits were paid, it also means the unemployment tax rate for the employer went up.

The end result is that even more money is paid, which, if these companies had handled their paperwork correctly, would never have been owed in the first place. The size of that figure is scary. What’s even scarier, however, is that it happens in every state.

All business owners would love to hear that money is coming back to them. They may be able to hear this sooner than they think, but only if the owner is adequately prepared and takes the time to contest fraudulent unemployment insurance claims.

How Can I Keep My Insurance Rate From Increasing?

Keeping your unemployment insurance rate low comes down to knowing all of your state’s specific laws and keeping superb documentation. You should be able to answer questions like, “Who is qualified to receive benefits?”, “Who is paying the benefits?” and “How does the claim affect my taxes?” These are a few of the questions that must be answered, and answers will vary depending on where you do business.

Furthermore, even when you think you know how the process works, you might have still overlooked some small-yet-important details. Each state has very specific rules, and every claim should be looked at individually.

Know Which Rules Apply to You, Because There Are Many

You must know the laws associated with your jurisdiction. For example, in Texas, students cannot quality for unemployment insurance, but they can in California. In addition, there are also state-specific approaches to traveling employees, multi-branch companies and any other business that happens in multiple states.

It doesn’t stop there. In Florida and many other states, relocating a business may or may not disqualify your employees who choose not to follow you. If the move causes hardships for the employee, you are liable. However, if the employee would have a similar distance to travel and a viable mode of either private or public transportation, you are not liable.

In some instances, there are other laws and services that can provide assistance for the unemployment insurance exceptions. You need to know what those are. Look carefully at each specific law to know which situations apply to your business.

Above All, Keep Lots of Detailed Documentation

When reviewing a benefits claim, your jurisdiction’s unemployment insurance office relies on your documentation and understanding of the situation to determine eligibility. Therefore, if you do not report the type of information that your state is looking for, you may be charged for benefits.

It is very important to document warnings and discussions you have with every employee. Often, if the employee does not attempt to change his or her behavior before quitting, and this is documented, you will not be liable. Life changes and events can be important in determining eligibility, so it’s important to document whether or not the employee notified you of changes in their health or personal life before leaving the company. Remember, however, that many employees are protected by privacy laws, so be sure to limit your inquiries to those allowable by law.

In order to make the process simple, reliable and consistent, you should have documentation from initial employment until the final separation for each and every employee.

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