Tuesday, April 06, 2010

Feeling Blue About Pink-Slip Taxes

From the Wall Street Journal:

With pink-slip taxes increasing, more small-business owners may be motivated to appeal claims for unemployment benefits filed by former employees who quit or were fired for cause—but such appeals can sometimes backfire.

U.S. employers are required to make regular tax contributions toward unemployment insurance. They're taxed at a rate that varies by state and the size of their payroll. That rate can increase as a business lays off more employees.

Rashelle LeCaptain says she has appealed four unemployment-benefits claims successfully.

"It's an experience-rated system," says Jeffrey Wenger, associate professor of public administration and policy at the University of Georgia at Athens.

So far this year, businesses with fewer than 500 workers shed 29,000 jobs, while their larger counterparts cut 18,000, according to payroll company Automatic Data Processing Inc.

Due to rising jobless claims, at least 35 states hiked their tax rates or wages subject to unemployment taxes this year, concludes a 2009 survey from the National Association of State Workforce Agencies.

While workers who leave jobs voluntarily or get sacked for poor behavior are typically deemed ineligible for unemployment insurance, some seek it out anyway. But the upcoming tax hikes mean employers may want to be diligent about appealing unwarranted claims, experts say.

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