State Of Michigan Fines Consulting Firm For Advising Employer To Avoid Unemployment Taxes

Trucking and furniture companies also reach settlements

DECEMBER 21, 2005 – Three Michigan companies have reached settlements with the State of Michigan, totaling more than $42,300 for their involvement with plans to avoid some of their state unemployment taxes.

One of the companies is an accounting and consulting firm and is the first employer advisor to pay a fine for a case involving SUTA Dumping.

“The consultant reached a negotiated settlement with the Unemployment Insurance Agency (UIA) and agreed to pay a $25,000 penalty,” David A. Plawecki, a deputy director with the Michigan’s Department of Labor & Economic Growth, said.  “In addition, the firm agreed not to offer inappropriate unemployment tax advice to clients in the future.”

The second employer is a trucking company and has reimbursed UIA for nearly $4,200 in unpaid UI taxes and interest charges.

Plawecki explained that the employer had set up a “captive” leasing arrangement by forming its own employee-leasing company, to which it shifted its employees and then leased them back to itself, thereby avoiding some unemployment taxes.

The third employer is a furniture company and has agreed to repay the agency for about $13,100 in unpaid taxes plus interest.

In this case, the employer closed its unemployment tax account and transferred its company payroll to a newly established employer at the “new” employer tax rate of 2.7 percent, which was lower than the company’s former tax rate.  UIA determined the restructuring was inappropriate and resulted in a $13,100 tax loss to the state’s unemployment insurance trust fund.

SUTA (state unemployment tax act) Dumping plans usually involve moving employees from an employer’s high unemployment tax rate account to a lower tax rate account.  The prime intent is to pay less tax.

UIA Director Sharon Bommarito said the companies were very cooperative with the agency and accepted its findings.

“We are aggressively working to ensure that all employers comply with the legal requirements of the MES Act,” she said.  “By enforcing the UI program’s integrity, we help to maintain a fair system for all employers, sustain the solvency of the UI trust fund, and ensure that monies are available to assist those who need and are entitled to unemployment benefits.”