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Wednesday, February 22, 2006


As long as there are taxes, there will be taxpayers trying to manipulate the rules to lower their taxes. As long as there are taxpayers trying to manipulate the rules, the taxing authorities will enact new rules to try and close the door on those manipulations.

This cycle is playing out in the area of state unemployment taxes. The rate of unemployment taxes of a particular employer is based on the “experience” of an employer with his past employees. Taxpayers have attempted to obtain better rates by transferring employees to related businesses to get away from their bad "experience" ratings, or acquiring businesses with better experience ratings.

In 2004, the federal government passed a law requiring states to pass laws to curb these activities, referred to as SUTA (State Unemployment Tax Act) dumping. In 2005, Florida did its part and enacted new laws, effective January 1, 2006, that impose serious sanctions, including criminal prosecution, on those conducting SUTA dumping. The new law has application to transfers of a business between related entities or owners, and the acquisition of the “experience” of a business.

If this is an area of concern for you, more information on the new Florida law is available at TIP # 0560BB.

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