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Tax Department Tip of the Month

Tax Tip for February, 2010

Registered users of Unemployment Tax Services, the free TWC online utility, should update their online profile any time they change e-mail addresses. TWC uses the e-mail address to enable online password changes as well as a means of notifying employers.

Updating the profile is quick and easy. After logging in to Unemployment Tax Services, select the "My Profile" link from the upper right of any page. Next, the user will enter the new e-mail address and then submit.

To ensure that e-mails are received and not filtered, users should add the TWC e-mail addresses taxserv@twc.state.tx.us and tax@twc.state.tx.us to their address book.

Tax Tip for January, 2010

Annual Domestic Reporting

The annual report and contribution for domestic accounts that have requested annual filing is due on or before January 31, 2009.

The online version of the annual report is available now for those domestic employers who elected to file and pay their state unemployment tax annually. TWC encourages Annual Domestic Filers to file their annual report and pay their tax due online by using Unemployment Tax Services, a free online service. During the quick and simple registration process, new users create a User ID and password that will be used each time they access the online system. To register for access and to learn about other online services, visit our Unemployment Tax Services web site.

Earned Income Tax Credit

In accordance with Texas Labor Code 104.004 (a) and HB 2360 passed during the 81st Texas Legislative Regular Session, employers (a person who employs 1 or more employees) must notify all of their employees (an individual who is employed by an employer for compensation) of the federal earned income tax credit (EITC) general eligibility requirements, no later than March 1 of each year. The EITC is a refundable federal income tax credit for low to moderate income working individuals and families.

1. In person;
2. Electronically at the employee's last know e-mail address;
3. Through a flyer included, in writing or electronically, as a payroll stuffer; or
4. By mailing the information to the employee at the employee's last known address by United States first class mail.

Employers may use IRS Notice 797, or a written statement with the same wording as IRS Notice 797 when notifying employees. IRS - Notice 797 provides employees with the basic information for EITC.

There are several websites created to assist employees with additional information, eligibility requirements, general overview and income guidelines for EITC.

For more information, go to: http://www.eitc.irs.gov/central/Preview2009/ or, http://www.twc.state.tx.us/welref/wrjseek.html

Tax Tip for December, 2009

2010 Unemployment Insurance Tax Rates

Rising unemployment and layoffs placed increased demand on the Unemployment Compensation Trust Fund in 2009. As a result of this greater demand, and as required by formulas set in state law, 2010 employer tax rates will rise in order to replenish the fund.

The Texas Workforce Commission (TWC) has taken actions to minimize tax increases and keep as much money as possible in the Texas economy. First, each employer's deficit tax was adjusted down by 50 percent. The agency has secured interest-free loans from the U.S. Department of Labor through the end of 2010. Also, the agency will work with the Texas Public Finance Authority to issue bonds in the private sector next year to access funds at a lower interest rate than what will be available from other sources beginning in 2011.

The components of your 2010 tax rate are:

• The general tax rate is based on claims against your account. If TWC has paid benefits to your employees who were laid off or separated through no fault of their own in the past three years, you will be assessed a general tax.
• The replenishment tax rate is charged to all employers to cover unemployment claims not charged to a specific employer. This tax varies from year to year but tends to increase following economic downturns when claims increase and businesses close.
• The deficit tax rate is charged to all employers when the Trust Fund balance falls below a certain statutory level or balance.
• The employment and training assessment is a flat tax of 0.10 percent, paid by all employers, and is used to fund the skills training program.

You also may be able to reduce your employer taxes for 2010. If TWC paid benefits to your employees who were laid off or separated through no fault of their own, you may find it beneficial to "buy down" the tax rate. Please visit our web site at http://www.texasworkforce.org and click on the "Businesses and Employers" menu link for more information, or access the voluntary contribution analysis through Unemployment Tax Services. Under the Voluntary Contribution Analysis link, you will find a convenient way to calculate a "buy down" and evaluate the return on the up-front investment.

TWC is dedicated to finding ways to lower the financial impact of rising unemployment on Texas employers. One of the most effective ways is to help those who are out of work find a new job as soon as possible. This rapid reemployment emphasis is a primary focus of TWC and the 28 local workforce development boards. Together, we can weather the current economic challenges.

Tax Tip for November, 2009

Those employers who employ only domestic employees may file and pay their Texas Unemployment Tax annually instead of quarterly. An employer who elects to report wages and pay contributions on an annual basis must complete and return the Annual Domestic Election Form by December 31 to enable them to begin filing annually for the next year.

Only those employers who have only domestic employment qualify for annual filing. Employers are not eligible for annual filing if they have more than one type of employment.

The election form must be postmarked no later than December 31, 2009 to be effective for calendar year 2010. If you have questions about electing to report annually, please contact any TWC Tax Office or contact the TWC Tax Department Status Section at (512) 463-2731 or e-mail us at tax@twc.state.tx.us.

Tax Tip for October, 2009

Computation of the 2010 unemployment insurance tax rate is based on your employment experience for the past twelve calendar quarters. Benefit payments charged to your tax account and taxable wages, which you have reported and on which you have paid taxes, are used in the computation.

The Labor Code, Texas Unemployment Compensation Act, provides that only taxable wages on which taxes have been paid by October 31, 2009 can be used to compute your tax rate. If you have unreported wages or unpaid taxes that are due from the twelve quarters proceeding October 1, 2009, you are encouraged to submit your report(s) and payment by October 31, 2009. Payment of unemployment insurance taxes may decrease your 2010 tax rate.

Tax Tip for September, 2009

Cafeteria and 401(k) Plan

Do you offer your employees a Cafeteria Benefit Plan or a 401(k) plan?

Handling for unemployment tax purposes may vary widely from state to state. Texas’ interpretation of the taxability of these plans is covered on the Cafeteria and 401(k) Plans web page.

As always, you can speak with a TWC Tax Representative to determine the facts in your specific case. A listing of the TWC Field Tax Offices is also on the web site or you can call the TWC Tax Department at (512) 305-9667.

Tax Tip for August, 2009

The Myth of Contract Labor

One of the most frustrating problems a business can face is competition from rivals who have unfairly reduced their costs by misclassifying their workers as contract labor. By failing to pay the required taxes on these workers' wages, these companies not only gain a competitive advantage; they also raise the unemployment tax rates for all other employers.

Texas law presumes that workers are employees unless the business can demonstrate otherwise. Independent contractors provide services, but in doing so they are free from the direction and control of the business. View the list of factors (PDF) used by the Texas Workforce Commission in making a determination.

Please contact the Tax Department at tax@twc.state.tx.us if you have information about other employers who are misclassifying their workers or questions about employee/contractor classification.

Tax Tip for July, 2009

TWC Employer Tax Account Audits

The Texas Workforce Commission (TWC) Tax Department conducts audits of employer accounts to insure compliance with the Texas Unemployment Compensation Act (TUCA). Routinely these audits result in the employer having over-reported their wages to the TWC due to two specific items. Many employers are not aware that tax is only paid on the first $9000.00 of each employees wages (wage base) and the TUCA provides for a number of exceptions to employment.

Some of the most common exceptions:

• Service as an elected official of a political subdivision
• Service of a child under 21, spouse or parent of a sole proprietor
• Service in the employ of a Church.

The TUCA also provides for certain exceptions from employment for a variety of training or rehabilitative work associated with work relief or work training programs. If you have any questions regarding the reportability of your workers, please contact the nearest TWC Tax office.

Tax Tip for June, 2009

If you lease your employees from a Staff Leasing Company or a Professional Employer Organization (PEO), Texas state law requires the Leasing Company have a current license issued by the Texas Department of Licensing and Regulation (TDLR). To verify that the Leasing Company you are using has a current license, contact TDLR at 1-800-803-9202 or visit their website. If the Leasing Company you are using doesn't have a current license, it is your responsibility to report your leased employees under your own TWC account number. You may also be held responsible for filing prior Quarterly wage reports and paying related taxes. If you have any questions regarding the reporting of leased employees, please contact the nearest Texas Workforce Commission Tax office.

Tax Tip for May, 2009

Texas Minimum Wage Increase

Section 62.051 of the Texas Minimum Wage Act automatically adopts the federal minimum wage as the Texas minimum wage. In 2007, Congress passed, and the President signed legislation increasing the federal minimum wage for 2007, 2008 and 2009.

Effective July 24, 2009, both the federal and Texas minimum hourly wages will increase to $7.25 per hour.

Tax Tip for April, 2009

Overpaid your Unemployment Insurance (UI) Tax?

From time to time, an unusual event may cause an overpayment of UI tax. If you overpaid your account, TWC will refund the excess amount.

To make the process as quick and efficient as possible:

• check your account to be sure it is current for employer's quarterly reports
• review your report history for obvious errors
• submit a request signed by an officer or authorized representative (use the form C69QCR that notified you of the credit for faster service).
• request 'all available credit' or ask for a specific amount

Before TWC issues a refund, we review and verify the details of your account for the following:

• has required information about the structure and business name been provided?
• have all quarterly reports that are due been filed?
• have all reports processed properly?

After we verify the account, TWC approves the refund. The State Comptroller of Public Accounts prints the checks, and then returns them to TWC to mail. The entire process takes at least 90 days.

You have three years from the postmark date of the money to request a refund.