Wage Audit Notices: Why They Matter to Your Bottom Line

You may have received a Wage Audit Notice from the SC Department of Employment and Workforce (DEW) in the mail or online via your SC Business One Stop (SCBOS) account. But perhaps you’re unsure what to do with the form or even why you need to fill it out.

These notices are critical to helping stop unemployment fraud and improper payment.

Each week DEW compares wage and new hire databases to the unemployment benefit recipient database in order to identify individuals who may have improperly received unemployment benefits while being employed. Claims with potential for conflict are audited via Wage Audit Notices that are sent to the current employer of the individual in question.

Wage Audit Notices are sent by mail or electronically through SCBOS, depending on the employer’s preferred medium. This audit form only requests wage information for weeks that the individual may have also filed for unemployment benefits.

Wage Audit Notices should be completed and returned in a timely manner in order to ensure the integrity of the unemployment program, minimize improper payments and maintain lower tax rates for you and all S.C. business owners.

You may submit Wage Audit Notices electronically through SCBOS via the Internet Response Module for Employer (IRME) portal, which also allows you to register to receive audit notices by email. Learn more about IRME here.

You may also respond by fax, mail or email with corresponding payroll documentation using the contact information provided on the notice. The fastest and easiest way to respond is electronically through SCBOS.

Once DEW receives the requested wage information, any week(s) that an individual received improper payments will be disqualified, and the individual will be held accountable for repaying the debt. Additionally any charges incurred will be credited back to the corresponding employer or program initially charged with the claim.

Federally-funded Work Opportunity Tax Credit Program on Hiatus

Due to the expiration of the American Tax Payer Relief Act of 2012 on December 31, 2013, the Work Opportunity Tax Credit (WOTC) program is currently expired. Though there is no guarantee, the WOTC is expected to be renewed and made retroactive to the expiration date, as has been the case numerous times since program inception in 1996.

During this current hiatus, businesses are encouraged to continue filing their WOTC requests in order to meet the mandatory 28 day filing deadline. Per U.S. Department of Labor instructions, DEW’s WOTC office will accept but will not process determinations during this period of expiration.

To learn more about the WOTC program at dew.sc.gov/wotc.

Employees vs. Independent Contractors: Classifying Your Workers Correctly

urlDid you know that you are not required to pay unemployment taxes on certain types of workers? In general, your business is required to pay quarterly unemployment taxes if it meets any one of the following criteria.

  • Pays $1,500 or more in wages in any calendar quarter or has at least one employee during any 20 weeks in a calendar year.
  • Acquires all or part of a business that was an employer subject to UI taxes at the time of the acquisition.
  • Is liable under the Federal Unemployment Tax Act and has employees in South Carolina.
  • Elects to become a liable employer.
  • Pays cash wages of $1,000 or more in any calendar quarter for domestic services.
  • Pays $20,000 or more to individuals employed in agricultural labor during any calendar quarter.
  • Employs 10 or more individuals in agricultural labor for a day in any 20 weeks in a calendar year.

However, there are a few exceptions to these criteria – one of which are independent contractors. You are exempt from paying unemployment taxes on independent contractors because these individuals contract to do a job according to one’s own methods without being subject to the employer’s control.

DEW classifies your workers’ employment status as an employee or independent contractor when you establish an employer account. The decision is based on the employer’s right and authority to control and direct the individual’s work.

The principal factors showing right and authority to control and direct work include:

  • Direct evidence of right or exercise of control
  • Payment method
  • Furnishing of equipment
  • Right to fire

Although a contract between parties is considered, the fact that it states the relationship as an independent contractor does not bind DEW in its determination.

Misclassifying an employee as an independent contractor could prove costly for your business. DEW randomly audits employer accounts and if found liable, you will be held accountable for back taxes. If you mistakenly classify independent contracts as employees and pay taxes on those individuals in error, you may request a refund.

If you have questions about the classification of a worker, it’s best to seek clarification from DEW to prevent paying improper taxes. DEW tax field deputies are location in every region of the state and are able to assist you with worker classifications. Visit dew.sc.gov/fieldservice to contact a district office near you.

For more in depth information about employer unemployment tax liability, visit dew.sc.gov/UItax.

For a complete list of situations where you may be exempt on paying unemployment taxes, please refer to the South Carolina Code of Laws, sections 41-27-210, 41-27-220, 41-27-230, 41-27-235, 41-27-260.

Tax Video Answers Your Questions

Ever wondered how the whole Unemployment Insurance tax process fits together but didn’t know where to turn for a quick answer?

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With time-pressed business people like you  in mind, the S.C. Department of Employment and Workforce (DEW) recently produced a short video that offers an overview of the entire tax process and addresses frequently asked questions.

It is available at dew.sc.gov/employers and dew.sc.gov/uitax. The video cover topics such as criteria for being a liable employer, setting up an account, tax rate determination, reporting and payment responsibilities and tips for keeping unemployment taxes down.

The video will also be shown at the free Withholding Tax Workshops held throughout the year in partnership with the S.C. Department of Revenue and the Internal Revenue Service. DEW tax field deputies present in these sessions and will be on hand to answer questions and show the video. Visit this page for a schedule.

Ads Promote New Hire Registry Awareness

You might have seen or heard about the SC New Hire database on your television or radio lately.

Public service announcements highlighting the importance of businesses reporting newly hired employees to the state registry at scnewhire.com are running across the S.C. airwaves through the year. The campaign is part of a nationwide initiative to prevent unemployment insurance fraud.

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 The S.C. Department of Employment and Workforce received special grant funding from the Department of Labor specifically to promote the new hire directory to employers.  The majority of all unemployment benefits overpayments are caused by claimants collecting benefits after they have gone back to work. 

DEW works to educate claimants on the importance of stopping their claims when they begin work and not when they collect their first paycheck. But it also encourages employers to report all new workers to the state new hire database. DEW cross matches data from the directory with information in its unemployment benefits system.

Comparing this data enables DEW to identify people who are collecting unemployment benefits while also being employed.

Businesses can help in this process by reporting new hires as soon as possible to scnewhire.com. Listen to the radio spot here.

Learn more at dew.sc.gov/scnewhire.

DEW Recoups $11.3 Million of Fraudulently Collected Unemployment Benefits

As the individual income tax filing season comes to an end, the SC Department of Employment and Workforce (DEW) announced it has recovered $11.3 million from individuals who knowingly received unemployment benefits to which they were not entitled.

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“One of the agency’s top priorities is to ensure that we address unemployment insurance improper payments in order to continue to restore the integrity of the unemployment insurance trust fund,” said DEW Executive Director Cheryl M. Stanton. “We recognize that improper payments are an issue, and we take it very seriously, which is why we are constantly developing and implementing new tools and technology to help us address the issue.”

The funds were collected through the Treasury Offset Program (TOP), an initiative that intercepts federal tax refunds when individuals have not responded to requests to repay unemployment insurance benefits that they were not entitled to collect.

South Carolina was one of five states recently selected to help lead the nation’s efforts to improve Unemployment Insurance  integrity commonly known as fraud and overpayment prevention.

The TOP program, piloted last year, required the agency to develop extensive integrity controls, procedures and employee training programs to meet rigorous standards established by the federal government.

The Work Opportunity Tax Credit is a Win-win for All

The Work Opportunity Tax Credit (WOTC) provides a federal tax income benefit for businesses who hire individuals from specific target populations.  Provided as an incentive, businesses are offered a tax credit for each qualified new jobseeker; thereby, reducing their federal tax liability with each qualified hire. Tax credits range from $2,400 to $9,600, depending on the employee hired. 

 The WOTC has been a win-win-win experience, said Roger Blau, Ph,D., vice president of  DP Professionals in Columbia.

“Our company’s business is information technology staffing, and we are always searching for the best talent available to meet our client’s needs,” he said. “To be able to hire veterans to work at our client’s worksites has been beneficial for the individuals, for our clients and for us. 

The qualifying target populations include:

  • Temporary Assistance for Needy Families (TANF) Recipient – $2,400
  • Recently Released Ex-felons -$2,400
  • Designated Community Resident – $2,400
  • Vocational Rehabilitation  Client – $2,400
  • Supplemental Nutritional Assistance (SNAP) Recipient – $2,400
  • Supplemental Security Income Recipient – $2,400
  • Long-Term Family Assistance (TANF) Recipient – $9,000
  • Veteran Unemployed four weeks – $2,400
  • Veteran Unemployed six or more months – $5,600
  • Recently Discharged Disabled Veteran – $4,800
  • Disabled Veteran Unemployed six or more months $9,600

Sponsored by the U.S. Department of Labor, the WOTC program is administered by the South Carolina Department of Employment and Workforce (DEW). 

Though the WOTC office receives more than 250 tax credit requests per day, automation allows for receipt of certification within one week of submission. This allowed for the release of more than 18,500 certifications within days of legislative program reauthorization on January 1, 2013.    

In fact, in the past 12 months the WOTC office has issued a total of 46,657 certifications, representing in excess of  $128 million in federal tax savings to businesses in South Carolina.

 “For our company to receive a tax benefit is just the cherry on the cupcake,” Blau said.  “We are proud to have these veterans as our employees.”

For Roger Alley, owner of Blackstone Café in Beaufort “the tax credit helps a lot in keeping us profitable and is a good incentive for hiring from the targeted groups.”

“As a tax payer, I greatly appreciate it,” he concluded.

To learn more about how your business can take advantage of the Work Opportunity Tax Credit program,contact Laura Rushton, stateWOTC coordinator, at 803-737-2592 or lrushton@dew.sc.gov.

 If you would like to electronically file your tax credit requests,  view the employer page here and the third-party consultant page here.

 

 

 

DEW Makes Early Loan Payment

Agency to Avoid Higher Federal Taxes for Business

The SC Department of Employment and Workforce (DEW) in May voluntarily repaid $144 million to the federal government for the agency’s unemployment trust fund loan.

Making the payment early saves the state more than $1.7 million in interest costs.

For the past three years, South Carolina has made early, voluntary payments on the trust fund loan and has subsequently avoided higher federal unemployment taxes for its businesses.

States that borrowed money from the federal government must meet several criteria to avoid a Federal Unemployment Tax Act (FUTA) credit reduction for their employers. Making advance loan payments is one of the requirements, and South Carolina last month submitted its initial application to avoid FUTA credit reduction for 2013.

In fact, the Palmetto State was the only borrowing state in 2012 to receive approval from the U.S. Department of Labor (DOL) to avoid the higher federal unemployment taxes.

To date, South Carolina has repaid more than $300 million of the $977 million initially borrowed from the federal government. After the 2013 loan repayment of $144 million, the outstanding balance will be approximately $530 million. The agency also plans to make a $50 million payment in September. The state is scheduled to repay the entire loan amount by the end of 2015.

The Internal Revenue Service will publish a list of credit reduction states after DOL makes its certifications in November and will have additional information available about completing the federal 940 tax forms.

FUTA Background

Employers pay federal unemployment taxes on the first $7,000 of each worker’s annual wages. The FUTA tax for 2013 is a flat 6 percent. However, businesses that pay their state unemployment taxes on time and in full can receive up to a 5.4 percent credit if the state is not subject to any credit reductions. Therefore the net FUTA tax rate is typically 0.6 percent.

Credit Reduction: What it Means

Federal law requires a reduction in the FUTA tax credit when a state has outstanding federal unemployment loans for two years and has not made sufficient voluntary payments towards the loan. The reduction in the tax credit is 0.3 percent for the first year and an additional 0.3 percent for each succeeding year until the loan is repaid or other criteria are met. South Carolina avoided credit reduction in both 2012 and 2011.

Hiring a Veteran Makes Good Business Sense

Veterans make up approximately 7.7 percent of the national workforce, and the number continues to rise as thousands of servicemen and women are returning home from overseas.

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As more and more businesses join the initiative to hire veterans, now is the time to consider it yourself.

Servicemen and women are an asset to any major corporation or small business because they often possess a set of skills and qualifications that meet the high demands of a fast paced, global economy.

Such attributes include:

  • Veterans come from highly skilled and highly trained backgrounds.
  • Veterans are technical and innovative thinkers.
  • Veterans possess an excellent work ethic.
  • Veterans come with several federal tax incentives.
  • Veterans are accustomed to working under pressure and some in life threating and dangerous situations.
  • Veterans are problem solvers.
  • Veterans are able to work in a team setting and can also assume leadership roles.
  • Veterans are familiar with working with a diverse group of individuals or in a diverse working environment.

If you are interested in hiring a veteran, contact your local SC Works center to speak with a veterans’ representative who can connect you to this highly talented workforce.  

Contributing writer:  Stephanie Lovett, Disabled Veterans Outreach Program Representative at the Aiken SC Works center.

DEW Field Services Team Fosters Connection Between Businesses, Agency

Joyce Driggers’ secret weapon is Scotch tape.

She keeps a roll stashed in her car’s glove box at all times. One of the most important things she’s learned during her years as a tax field deputy? You’ve got to always be prepared.

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She knocks on doors of employers throughout Richland, Lexington and Calhoun counties in her efforts to deliver subpoenas for Wage and Contribution reports and accompanying records. Sometimes employers don’t answer or are not around so Driggers tapes an envelope holding the subpoena and her business card to the door.  Over the years, she’s found this to be an effective technique as it ensures that individuals see the paperwork.

Driggers, Columbia district manager for Field Services, is one of 31 field deputies throughout the state that work to foster employer understanding about what the unemployment insurance law requires and maintain a good relationship between DEW and businesses. The Field Services Division’s purpose is to protect the UI program’s integrity by working with all businesses.

They are responsible for securing delinquent Wage and Contribution reports, conducting audits, conducting wage investigations, and making changes in status of an employer’s account. They also assist in presenting monthly Small Business Tax Workshops with the Internal Revenue Service and the SC Department of Revenue. Check out the schedule of upcoming sessions and locations here.

“We have to be accountants and work with facts and figures,” said Driggers. “We have to be attorneys and know the law. We have to be a private detective. We’re also kind of public relations because we’re out there on the front lines. We are friendly but firm. You have to know how to relate to people in all walks of life.”

Bottled water and power bars are other essentials in her toolbox, said Driggers, who travels the backroads of Irmo, Chapin and Lexington County most days.

On a recent June morning, she began her rounds delivering subpoenas in the St. Andrews area, worked her way through the heart of Irmo, continued the journey into the county and through downtown Lexington. She knocked on doors, taped paperwork to doors and windows, talked to neighbors, left word with employees and even collected some reports that had been promised to her.

She later reported that she heard back and received paperwork and information from all but one of the employers she was seeking out that particular day. 

“With time you spot trends and learn how to deal with people,” said Driggers who explained that 90 percent of the employers she encounters are nice and very easy to work with.

However, there are some challenges. For example, being a field deputy is not an 8:30 a.m. to 5 p.m. job. When’s the best time to find a roofer in May? Try 5 a.m., says Driggers. Or the owner of a pool hall? You have to stop by after 6.

“Everyone of us has had adventures,” she said with a laugh. 

Driggers said she loves the variety her job offers.

“Every single day is something new,” she said.

Ronnie Clamp, manager of the state Field Services Division who served as a field deputy for 20 years, agrees.

“The cool thing about being a field deputy is you deal with accountants, attorneys and employers,” he said. “And to me the most interesting part was getting out and talking to them about their businesses and the different creative ideas people had for starting businesses.”

Learn more about Field Services and how to reach your local contact here.