Minimize UI Taxes
How to Minimize Unemployment Insurance Taxes
Improper payment of Unemployment Insurance (UI) benefits mean that a claim for benefits was paid in error. Improper payments occur when inaccurate or insufficient information is used to determine a claimant’s eligibility for UI benefits or when information is not received by the New Mexico Department of Workforce Solutions in a timely manner.
The improper payment of UI benefits is a serious problem that impacts employers, who end up paying for these errors through higher taxes. Unrecovered overpayments also negatively impact New Mexico’s UI Trust Fund.
True or False?
- Employers are not impacted by improper payment of UI benefits to former employees.
False. Improper payment of benefits is a serious problem that has a direct financial impact on employers.
- Employers can help reduce improper UI benefit payments, which nationally totaled $6.86 billion in fiscal year 2010.
True. Employers can take an active role in reducing improper UI benefit payments by providing accurate and timely information to the New Mexico Department of Workforce Solutions’ UI Bureau. Employers are required to:
- Report all new hires/ re-hires to the State Directory of New Hires.
- Respond to requests for verification of employee earnings.
- Provide timely (by the due date) and accurate employee separation information.
- Employers could pay higher costs for not providing employee information as required by law.
True. Consequences for inaccurate, delinquent, or delayed reporting of information may include payment of benefits to an unqualified claimant that could result in higher taxes, and/or time off from work to participate in an appeal hearing if benefits are contested.
- Inaccurate, delinquent, or delayed reporting of information directly impacts your bottom line.
True. Employers are taxed based on the amount of UI benefits paid to former employees. Benefits are paid, or not paid, based on information provided by unemployed individuals seeking benefits, as well as their former employers. If this information is not received in a timely manner, benefits may be paid to unqualified individuals.
- Employer verification of earnings is needed to calculate the amount of UI benefits payable for a specific week.
True. Accurate and timely verification of employee weekly earnings ensures that only the correct amount of UI benefits is paid.
- Only the separation and weekly earnings information provided by UI claimants is used to determine eligibility for benefits.
False. Separation information provided by an employer is used to verify a claimant’s reason for being unemployed. Accurate and timely reporting of separation information by employers ensures that claimants do not receive UI benefits to which they are not qualified.
- It is against the law for an employer to provide false or inaccurate employee information to the New Mexico Department of Workforce Solutions. Failure to respond to a request for employee information is also against the law.
True. Failing to report or providing inaccurate, incomplete, or delinquent employee information is against the law and could have serious consequences for the employer. These consequences could include: incorrect charges for improper benefit payments to former employees; increases in UI taxes; and fines or penalties.
- Reporting new hires and re-hires to the State Directory of New Hires, verifying employee earnings, and providing separation information to the New Mexico Department of Workforce Solutions is voluntary.
False. Reporting employee information is required by state and federal law.
- Reporting to the State Directory of New Hires is only required by employers at the state level.
True. Employers must report new hires to the State Directory of New Hires. This information is sent to the National Directory of New Hires.
- A UI claimant pays into the UI system from his or her paycheck and is entitled to these benefits.
False. Employers, not employees, pay taxes to fund UI benefits. Eligibility must be verified.
- Federal UI law states that individuals must be separated from employment through no fault of their own to be eligible for UI benefits.
True. It is important for employers to explain the reason behind a former employee’s separation when that information is requested by the New Mexico Department of Workforce Solutions.