4.1.3     Process Online Penalty or Interest Adjustments

[ 4.1.3.1 - Procedure ]

Process necessary online adjustments to correct employer accounts and add, reduce, or abate penalty/interest assessments based on abatement decisions rendered from employer protests;

4.1.3.1     Procedure

The objective to be achieved in the performance of the stated add, reduce, or abate penalty/interest assessment function is to apply an administrative standard to change or abate penalty amounts to the extent permitted under the Texas Unemployment Compensation Act (TUCA) under certain demonstrated conditions, judged to be beyond the reasonable control of the employer. In those cases the element of "good cause" has been demonstrated, penalty/interest amounts may be abated by either reduction or elimination. "Good cause", as it relates to penalty assessment determinations, is a documented event or chain of events which stand as reason for loss of control in the timely filing of a report and/or tax payment.

Prior to discussing penalty assessment, reduction, or abatement, it is necessary to address the legislative imperatives from which this agency draws authority to require employers to submit employment information to this agency.

This subsection establishes the "10 or more employees require electronic reporting" rule. Magnetic wage records may be reported to the TWC in accordance with the Texas Workforce Commission Magnetic Media Reporting Specifications Manual .

All employers should be advised that a paper Form C-3, signed by the owner of the business, must be filed with the TWC even though wage reporting has commenced via magnetic media if C-3 data is not filed on magnetic media.

A report is received together with the supporting reason given by the employer as to why the report is being filed late. The employer is requested to provide a reason for the late filing in the form of a signed letter, and request that no penalty be assessed, due to the reasons given, and to transmit both the report as well as the tax amount computed to be due.

The accounts examiner determines if "good cause" has been shown and is the proximate cause as to why report is filed late. Within guidelines of "good cause" shown, the accounts examiner will try to determine that the filing of the report is or was impossible, or failure to file the report is due to valid, factual, reasonable cause, beyond the control of the taxpayer, and not due to negligence.

Procrastination, delay, neglect, preoccupation with other matters are not valid or acceptable reasons for not assessing the penalty. Also, a history of late filing may influence the decision whether to grant an extended due date for the filing of a report.

Some reasonable "good cause" for delinquent filing would include:

• Death or serious illness of the person or his immediate family primarily responsible for the preparation and/or filing of the report;
  
  
• Loss by mail (supported by copy of original report and affidavit signed by the person who mailed the report and stating when and where mailed);
  
  
• Records being held by a court of law as evidence;
  
  
• Destruction of employer's records or place of business by fire or casualty;
  
  
• Delay caused by erroneous information given the employer by TWC tax personnel. Occurrences of this type must be supported by statement of TWC employee.
  
  
• Texas wages reported to another state. This must be supported by statement from state to which wages were reported, and must also include the date the report was filed.
  
  
• Employer has an impeccable record and it is the first occurrence.
  
  
• Account is inactive and remaining balance is only late report penalty on the final report with no taxable wages.
  

Note:  If the cause does not fall within one of the reasonable causes enumerated above, the Tax Department Director will decide whether, in his opinion, the statement of facts submitted by the employer establishes a reasonable cause for delinquency. A cause for delinquency which appears to a man of ordinary prudence and intelligence as a reasonable cause for delay in filling a return and which clearly negates a willful intent to disobey the taxing statutes, or gross negligence, will be accepted as reasonable. However, mere ignorance of the law will not be considered as reasonable cause.

Reasons which may be recognized as "reasonable cause" for not assessing the Section 213.021 interest include:

• Loss by mail, which must be supported by bankable remittance and statement signed by the person who mailed the remittance and stating when and where mailed;
  
  
• Texas taxes paid to another state, which again must be supported by statement from the state to which the payment was made, and must include the date of payment to that state;
  
  
• Death or serious illness of the person or immediate family member primarily responsible for the payment of contributions;
  
  
• Delay caused by erroneous information given the employer by TWC tax personnel. Occurrence of this type must be supported by a statement of the TWC employee;

Note:  If the cause does not fall within one of the mentioned reasonable causes, the Tax Department Director will decide whether the statement of facts submitted by the employer establishes a reasonable cause for delinquency. A cause for delinquency which appears to a man of ordinary prudence and intelligence as a reasonable cause for delay in paying taxes and which clearly negates a willful intent to disobey the taxing statutes, or gross negligence, will be accepted as reasonable. However, mere ignorance of the law will not be considered a reasonable cause.

Currently, the Employer's Quarterly Report, together with the required "good/reasonable cause" letter is processed by the Controller Department to the employer's tax account with a 'Stop 01 - Abatement Pending'. The stop prevents the production of erroneous statements as well as the execution of the Automatic Collection Action Program (ACAP).

The "good/reasonable cause" letter is reviewed by an accounts examiners after the Employer's Quarterly Report (Form C-3) has cleared the Employer Master File (EMF).Within 10 days, the Form C-3 is posted to the EMF.

Once the decision has been made to adjust or abate  penalty assessment, the "good/reasonable cause" letter is marked by the accounts examiner to reflect a  finding of good cause. The letter is then sent to the Controller Department for microfilming and entry onto the Transaction Log (TDO screen).

To communicate action performed upon the account, the accounts examiner may call the employer, and document the Field Tax Comment (FTC screen) with regards to the telephone contact. Also, the accounts examiner may send a  letter to the employer to addresses any special issues. Such issues could include:

• Good cause not demonstrated, or history of late report filing; request for waiver denied.
  
  
• Partial reduction of a penalty amount, based upon good cause being shown, which allows non-assessing of the late report (213.023) penalty, but requires assessment of the late tax payment (213.021) interest;
  
  
• A copy may be sent to a Field Tax Office, if the request came through a Field Tax Office, or if special issues arose, requiring Field Tax Office involvement.

'Timeliness' may be measured in the completion of this task with an individual accounting and tracking of each request for consideration of abatement through the Controller Department and Tax Department, Field Tax Operations, Employer Accounting and Review Unit. A method for tracking the Abatement/Reduction Function requests through the review and decision process currently exists through establishing "Stop 01- Abatement Pending" to mark the beginning of the Abatement/Reduction Function. When, at the conclusion of the Abatement/Reduction function, the "Stop 01-  Abatement  Pending" is released, an elapsed time computation may be derived.

As a reminder, the account being worked as "Stop 01 -  Abatement Pending" will be reflected in the 'Aged Stop List By Unit, AE Number', to call attention to those accounts which are in need of action or review. It should be noted that the Controller Department will process the Employer's Quarterly Report (Form C-3) to the tax account as received. The postmark date, penalty and interest computation, and any payment to tax and/or penalty and interest will be fully computed.

When the accounts examiner concludes action on the account and releases the stop, it is the accounts examiner's "signature" on the work performed. This produces a "trail" as to what work was done to the account, who completed the action performed on the account, and when it was done.

The add, reduce, or abate penalty assessment function is considered complete when the accounts examiner releases all Stops, and sends a communication to the employer, advising of action taken.