Contributions are paid to the Commission in two ways: taxes and reimbursements. Employers are permitted, with Commission approval, to switch their method of payment from reimbursing to taxed. It is the Status section's responsibility to make this change.

All Employers except the State of Texas are eligible to pay taxes to the Commission. States, political subdivisions, instrumentalities of states or political subdivisions, federally-recognized Indian tribes and organizations exempt under section 501(c)(3) of the Internal Revenue Code are also eligible to pay reimbursements in lieu of paying taxes. However, because it is not possible to determine which option will best benefit an Employer, a Status Section employee should never advise an Employer to be taxed or reimbursing.

C-6F Application for Withdrawal of Election to Pay Reimbursements

The Act has specific guidelines which must be adhered to when considering an Employer's request to change their method of payment from reimbursing to taxed.

According to the Act, notification of the desire to switch from reimbursing to taxed must be submitted no later than December 1 prior to the year in which a change to taxed is desired. If there is evidence the Employer made a timely contact with Field Tax, their written notification should be considered on time, even if it was received after December 1.

For example, an Employer who wishes to change from reimbursing to taxed effective 1-1-10 would need to notify the Commission in writing on or before 12-1-09.

The Status Section is governed by Rule 815.102 when determining the timeliness of a notification. Usually the postmark date of the notification determines timeliness.

If notification is received, verify whether or not the notification is timely. If the notification is not timely, send the Employer a C-6F/C-6A denial letter (template) explaining the deadline for submission. Place the file copy of the letter in the Doc Log & Destroy basket and update the FTC screen to document the actions.

A change to taxed status remains in effect until the Commission receives timely notification of the Employer's desire to change their method of payment.

Employers can make changes in their payment method only at the beginning of a calendar year. All changes from reimbursing to taxed are effective January 1. An Employer may not change their method of payment in the middle of a year.

Employers are not permitted to switch their method of payment every year. An Employer must remain with a taxed or reimbursing method of payment for at least two calendar years. If an Employer requests their method of payment be changed prior to the two calendar years, the request should be denied.

If an Employer wishes to change their method of payment from reimbursing to taxed, verify whether or not the Employer has gone at least two calendar years under their current method of payment. If the Employer has not gone at least two calendar years under their current method of payment, send the C-6F/C-6A denial letter (template) explaining the two year requirement and furnish the Employer with Forms C-6F plus the Advantages and Disadvantages information. Place the file copy of the letter in the Doc Log & Destroy basket and update the FTC screen to document the actions.

Employers are required to notify the Commission in writing if they desire to change their method of payment to taxed. The official form for notifying the Commission of a desire to switch from reimbursing to taxed is Form C-6F. Initial notification does not have to be on the official Commission form. As long as an Employer notifies the Commission timely and in writing, their right to change to taxed is preserved.

If timely notification is received on an unofficial form:

1. Send the Employer a letter enclosing Form C-6F plus the Advantages and Disadvantages information. Trace the account for 3 months and update the FTC screen to document the actions. The letter must be approved by your supervisor.
   
   Do not change the account from reimbursing to taxed until properly completed Form C-6F is received. There may be instances where an employer may notify TWC via phone call requesting to change to taxed. If the phone request is made on or near the deadline, the date the phone call is made may preserve the right to pay taxes. Check with your supervisor for approval. Send a letter approved by your supervisor enclosing Form C-6F. Update the FTC screen to document’s approval.
   
   
2. If properly completed Form C-6F is not received within 3 months, send a field assignment by e-mail to secure completed form. If the Employer is out-of-state, write them a letter advising of no further action and return their original notification. The letter must be approved by your supervisor. Update the FTC screen to document the actions.

Taxed political subdivision accounts are issued special account numbers beginning with 99-88. These account numbers are assigned by the Status Operations Unit (SOU).

Taxed 501(c)(3) organizations are assigned regular account numbers from the system.

Ownership types:

10 - 501(c)(3) Non-Profit
11 - Political Subdivision and Out-of-State Governmental Unit

An Employer may change their method of contribution from reimbursing to taxed only if they have been reimbursing for two or more calendar years. The effective date of this type of transaction is January 1 of the year in which the Employer desires the change to taxed. Since Employers are required to notify the Commission prior to the year in which they desire to change to taxed, the transaction cannot be performed until the effective date of the change. System edits prevents transactions from using future dates.

For example, an Employer wishing to change from reimbursing to taxed effective January 1, 2010 must notify the Commission on or before December 1, 2009. This notification is held, without performing the transaction, until January 1, 2010. Update the FTC screen to document the actions.

When performing this type of transaction the old reimbursing account is inactivated as of December 31 prior to the year in which the change to taxed is effective. The new taxed account is established with liability beginning January 1 of the year in which the change to taxed is effective.

For example, an Employer wishing to change from reimbursing to taxed effective January 1, 2010 would have its reimbursing account inactivated as of December 31, 2009 with final wages as of December 31, 2009. The new taxed account would be established with a subject date of 1-1-10 and a first wages date of 1-1-10.

When Form C-6F is received prior to the effective date of a change to taxed, trace the account until the effective date and update the FTC screen to document receipt of the form.

All taxed political subdivisions are assigned the same tax rate. Rather than being individually experience rated like other taxed accounts, these accounts are assigned a tax rate based on the experience of the entire group of taxed political subdivisions. The rate is determined on a yearly basis and can vary from year to year depending on unemployment claims.

Since taxed political subdivisions are assigned special account numbers, all status action must be done on C-10’s.

Prepare Form C-10 to close the reimbursing account. Label this C-10 “Day 1”.

Since taxed 501(c)(3) accounts require special handling this transaction should be performed using Forms C-10. Before completing Forms C-10, assign a pending account number if the Employer does not already have one.

To change a reimbursing 501(c)(3) employer to taxed status. Prepare Form C-10 to close the reimbursing account. All status action must be done on a C-10.