New regulations crack down on SUTA dumping

All companies in Missouri pay taxes into the unemployment compensation trust fund. Some companies have tried to get around these requirements in the past by purchasing another company or creating a shell company and transferring business to the new company, thereby erasing their employment history and clearing their unemployment insurance tax rate.

The maximum taxable amount per employee is $11,000, depending on the amount of wages the employee has received. Companies pay from nothing to 6 percent of each employee’s taxable amount; the percentage is based on several factors, including how many people are employed, unemployment tax payment history and how many unemployment claims have been filed against the company.

State legislation that took effect Jan. 1 creates stiffer penalties for companies that try to get out of paying taxes to State Unemployment Tax Authority. With the new regulations, Missouri is following the lead of the federal government, which passed the SUTA Dumping Prevention Act of 2004.

The new state regulations create stiffer penalties for companies that transfer employees or business to new entities in an attempt to get out of paying the taxes.

The law mandates that unemployment rates must transfer with businesses, according to Tammy Cavender, spokeswoman for the Missouri Department of Labor and Industrial Relations.

“There are things they look at: if there’s common

ownership, management, business (and) customers,” she said.

There are other methods that have been used to avoid unemployment taxes, including requesting a new employer tax number and transferring payroll to the new number, thus getting the “new employer” tax rate.

No companies have yet been prosecuted for SUTA dumping in Missouri under the new law, Cavender said.

She added that the new legislation is not related to the previous solvency issues with the unemployment trust fund, which has borrowed federal money several times since 2003 to make payments. Cavender said a $102.8 million payment is scheduled at the beginning of next month, and the department expects to pay off the remaining $135 million owed to the federal government by the end of 2007.

Tough Love

Individuals, organizations or employers that violate or attempt to violate the new state unemployment tax law face tougher penalties.

• Employers who violate the new law face tax rates that are raised to the maximum level, which varies depending on several factors.

• Any individuals or entities in violation could face civil penalties of up to $5,000.

• Violators can be prosecuted for fraud or attempted fraud.

Source: Missouri Department of Employment Services[[In-content Ad]]