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Tax Department Tip of the Month

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.

Tax Tip for March, 2009

TWC provides e-mail notifications to users who sign up for TWC online applications. These e-mails contain information about TWC and the volume of the e-mails is very low.

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 February, 2009

Taxable Wage Calculations

TWC frequently is asked how taxable wages are calculated. The first $9,000 paid to an employee in a calendar year is the annual taxable wages for an individual and the key to the basic taxable wage formula.

The following example demonstrates the amount of total wages, taxable wages and tax contributions due for an individual for all four quarters of a calendar year. This example assumes an employer had only one employee earning $2,500 a month in 2008.

This example illustrates how to arrive at the taxable wage amount for an employer with multiple employees.

An employer must file reports for each quarter even if he has zero taxable wages and does not owe any tax. It is important that Line 14 contain either the taxable wage amount or a 'zero' if there are no taxable wages. Although reimbursing employers do not pay this tax, they must also submit an Employer's Quarterly Report to report wages paid to their employees.

Taxable wages reported by a predecessor account may be used in arriving at the $9,000.00 taxable wage base for the successor account during the same calendar year provided there has also been a transfer of compensation experience between accounts.

If you have questions or need additional information, please e-mail the TWC Tax Department at tax@twc.state.tx.us

Tax Tip for January, 2009

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.

Tax Tip for December, 2008

Texas Workforce Commission
2009 Tax Rate Information

Dear Texas Employer:

Despite a downturn in the national economy, Texas remains strong because of its employers. Although average tax rates are up slightly over last year's rate, a historic 25-year low for Texas employers, the Texas Workforce Commission works hard to ensure that Texas employers pay no more taxes than necessary to pay unemployment benefits to individuals who are out of work due to no fault of their own and are actively seeking employment.

The following bullet points describe each component of your 2009 tax rate.

• The General Tax - based on claims against your account. If TWC paid benefits to former employees who were laid off or separated through no fault of their own in the past three years, you will pay the General Tax.
  
  
• The Replenishment Tax - charged to all employers to cover unemployment claims not charged to a specific employer. This tax tends to rise following economic slowdowns because claims increase and businesses close.
  
  
• The Employment Training Assessment - charged to all employers who are eligible for a computed tax rate to finance the Skills Development Fund Program. The Employment Training Assessment calculation is a separate line item on the Employer's Quarterly Tax Report.

You may be able to reduce your taxes for 2009. 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 (UTS). 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 works closely with local workforce development boards across Texas to fill job openings with qualified unemployed workers, and we fund training to upgrade the skills of workers to better match area employers' needs. We invite you to use our comprehensive online job resource, WorkInTexas.com. It's a fast, easy, and effective way to recruit qualified applicants and is provided free to employers and job seekers.

Finally, we hope you will take advantage of tax credit savings including state and federal work opportunity, employer's child care, health coverage, and IRS health coverage tax credits. For more information on these credits, please visit our web site at http://www.twc.state.tx.us/customers/bemp/bempsub8.html.

We pledge our continued efforts to keep your taxes as low as possible.

Texas Workforce Commission