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Fraud Awareness and UI - What You Need to Know

Here at Saul Bookkeeping we pride ourselves on keeping our clients up to date on the things they need to know around employee and reporting best practices. We just received this from the DC Department of Employment Services and while it echos many of our previous tips & blog posts sometimes it's good to hear it right from the source! And even if you're not in the DC area, these things are important no matter where your business is based. If you need help finding out the relevant local information for your business reach out - as a Saul Bookkeeping client we can help!

Image: JopwellCollection In honor of International Fraud Awareness week, the D.C. Department of Employment Services is contacting our employer base to raise awareness of fraudulent practices the Unemployment Insurance (UI) Tax Division monitors and investigates. We encourage you to refresh your knowledge of these violations, to help you remain in compliance and to protect your business from fraudulent practices.

Misclassification of Employees: The most serious compliance issue Tax Examiners search for is misclassification of employees. A worker is considered misclassified when the employer either intentionally or negligently mischaracterizes an employee's service as something other than covered employment. For example: a worker could be classified incorrectly as an independent contractor or hidden as an unreported (off-the-books) worker. Worker misclassification harms the unemployment insurance program by restricting claimant eligibility for benefits and reducing employer tax revenue on the unreported wages. For those reasons, worker misclassification detection is an important focus of our employer audits. Over- and Under-Reporting of Wages: Employers are responsible for promptly and accurately reporting wages. This correctly calculates your tax liability and balance due and helps ensure the integrity of the unemployment insurance system as a whole. SUTA Dumping: State Unemployment Tax Act (SUTA) “dumping” refers to employers’ unlawful attempts to pay UI taxes at a lower rate than they should. Instead of paying UI taxes at the rate assigned by DOES, an employer would attempt to avoid a higher rate by “dumping” its experience. Most frequently, this involves merger, acquisition, or restructuring schemes, particularly those where the violator shifts workforce/payroll from one business entity to another. The Office of Unemployment Compensation (OUC) has invested significant resources into employee movement detection software designed to identify potential SUTA dumping. The District has also passed legislation which penalizes employers who knowingly withhold or provide false information regarding the transfer of workforce/payroll from one business entity to another. Penalties range from significantly higher UI tax rates to monetary fines or even imprisonment. The best way to avoid penalties is to let us know when a change in your business occurs. You may email to report the following information:

· Change in the name of legal entity

· Change of designated legal or third-party representative

· Change of address, phone number, or email address

· Partial or total acquisition of another business

· Change of ownership or business organization (e.g., change from sole proprietorship to partnership), merger, acquisition, or business closure More information on employer responsibilities to prevent fraud is provided at the following link: Prevent Fraud - Employers. Please utilize the occasion of this International Fraud Awareness Week to take note of these fraudulent practices. When District employers are knowledgeable and focused on compliance, everyone wins. You protect yourself from liability and protect the integrity of the unemployment insurance system which provides a crucial lifeline to unemployed District workers when they need it most. Material from: DOES Office of Unemployment Compensation – UI Tax Division


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