in the Michigan Unemployment System
October, 2016 -- Following is an email letter exchange regarding how an employer can contest penalties imposed by the Michigan Unemployment Agency. Many thanks to Linda Kalinowski from Michigan UA for this information:
MTAP Member Question:
We have taken on new clients and discovered that their previous accountants were not filling on the MiWAM system. We went into the system and cleaned this account up but are receiving, in our opinion, unrealistic penalties for late filings. Most of these returns have zero dollars tax due on them, but we still receive penalties.
We have submitted a letter to abate those penalties with the Michigan UIA since June 19, 2015. We have followed up three times and they continue to say it is in a supervisor's hands and will be reviewed. We have several clients that do not have these filed, but we have decided not to file them until we can resolve this matter because, in our opinion, it is cheaper to pay the higher rates for not filling than it is to file the old returns.
These penalties are excessively high. If they are not reduced, what kind of options do we have to contest them beyond Michigan UIA? The Michigan Department of Treasury has the Tribunal, but how can we contest this within Michigan UIA?
Answer from the Michigan Unemployment Agency:
What your member is referencing is a law change that went into effect at the end of 2011 (Public Act 269 of 2011) that modified several sections of the MES Act. The section regarding the wage penalty was a change to Section 54. I have attached Fact Sheet 153 that UIA issued in 2015 in response to questions being received from employers regarding the penalties. The implementation of these increased penalties were required by the law changes passed by the Michigan legislature and UIA is simply implementing them.
In this public act was also the requirement that phases employers into having to file their tax returns electronically through MiWAM. This was a change to Section 13 which also implemented the rounding of the UI tax due to the nearest whole dollar. Public Act 269 required employers with 25 or more employees to file electronically beginning in 2013. Employers with 5 to25 employees were required to file electronically being in 2014. All remaining employers were required to file electronically beginning in 2015. UIA sent out letters to employers, posted information to the website, included articles about this requirement in the Employer Advisor, and conducted employer seminars around the state to educate employers and service providers about this change. Here is a link to one of the Employer Advisor’s articles from 2015 about the change: http://www.michigan.gov/documents/uia/Advisor_Special_Edition_-_March-20-2015_484824_7.pdf.
As your member indicated, employers do have the opportunity when they are charged penalties to protest them but there has to be proof provided about why the employer or their appointed agent failed to file the reports in a timely manner in the manner prescribed. If the employer claims that a prior service representative did not perform the services they were contracted to do, UIA is going to require proof that the service representative was contracted to perform the service, why the employer was unaware that the reports were not being filed and paid, and what actions the employer took with the service provider (did they file charges, sue them, etc.). The reality is that the employer is ultimately responsible for the filing and paying of the returns (compliance) and has to establish why they were unable to comply. Continuing to not file the returns is not the answer. This will simply create more issues for the employer. Each protest of penalties case is reviewed for its merits and a recommendation made based on a standard policy.
There currently is a backlog in the collection division on processing the requests for waiver of penalties. There is a new manager in place in that business area as of October who is working on the best way to resolve the backlog. If your member has a specific case they would like to discuss, I would recommend sending an email to the manager of the area with the specific UIA employer account number so it can be reviewed. The new manager’s name is Kimberly Berry and her email address is firstname.lastname@example.org.
Linda Kalinowski, Manager
Phone: 313-456-2188 | Fax: 313-456-2910