I recently became aware of a local small business that got not one, but two surprises in their mailbox from two different state taxing agencies. Actually, they weren't really surprises, but nightmares in an envelope!
The first letter they received was from the state bureau of unemployment advising them that their unemployment tax rate for the new year was increasing from .8% for the year to 11.8%.
You read that right...
Their unemployment tax rate was going from .8% to 11.8%. (that is from point 8 to 11 point 8!)
W-T-F?
You see, this business, like many others last year, had some turbulence in their cash flow during the year. They happened to make a late payment on their unemployment taxes during the quarter that the state set their rate for the next year. Once that happened, they got caught up in the machine.
Be aware - they did not skip the payment. They paid it in full about 60 days late when cash became available and they also paid the interest that was billed to them for the late payment.
IT GETS BETTER...
Shortly after they had that little explosive dropped into their cash flow planning, they received another letter from the state bureau of workers compensation.
Because one of their payments was 60 days late during the year, this business was told they were being dropped out of their group rating program for workers compensation for one year.
Important note - the state allows you to be 59 days late, but not 60. If you hit the magic 60 days, lights out.
Like the unemployment situation, the late payment was ultimately made in full on the 60th day. The business was not a habitually late payer for either of these tax programs.
End result of this little snafu?
Their workers compensation rate INCREASED 450% for the new year.
THE APPEALS ARE UNDERWAY
Naturally, this business has begun the appeals process with both state agencies. They have already lost the first round of the workers compensation battle.
Why they lost? Because the state is so far in debt, that they passed a law last year that said these penalty rates are in place for a year when late payments are involved. Few, if any, exceptions to be granted. Too bad...so sad.
MORAL OF THE STORY: Don't be late on your payroll taxes. Ever.
If you do business in the state of Ohio, you could be next...
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Scott Gregory provides CFO and controller services to service, manufacturing and distribution businesses in Northeastern Ohio.
Does it not depend on the method by which the $100/$120 is paid? Someone who values their time is more likely to settle for $100 instantly rather than go out of their way in 3 days' time to pick up an extra $20... once the subject has to go away and come back to pick up money, it makes little difference how long they have to wait so they opt for more. So they're willing to give up $20 to avoid wasting time in the future - would that make sense?
Posted by: Puma Outlet | Sep 01, 2011 at 08:58 PM