Where to Look

January 26, 2018

It is always nice to hear good things about our company

 

When I was on the other side of the table

Looking to make a major purchase or an upgrade

I always made it a point

To get as much information as possible

 

I was looking to see

Who would be the most qualified

To implement the program or vision

We looked to achieve

 

I never liked long winded explanations

Just give me the facts

 

When giving the presentation

Give an apple to apples comparison

 

That is the only way you can make an objective decision

 

If a presentation leads to more questions than answers

I found that disheartening

 

Why am I babbling about this…

 

Recently…I was delighted

When a client complimented HBS

On the completeness of our presentation

 

They went on to say…..

We interviewed another broker…

 Their presentation was confusing….

 Leaving more questions than answers….

 

They felt our proposal was self-explanatory

It provided all the information they needed to know

They liked our attention to detail

 

Our proposal also noted

What items were under contract

And their expiration dates

 

Our goal has always been…

Define the client’s needs…

Properly address the client’s needs…

Show value with our solution….

Build a relationship of trust with the client….

Continually educate our clients

 

Everything we do

Is done with the client’s best interest in mind

 

HBS has provided substantial savings

To many of the Delaware Valley’s

Most successful firms

 

Many were surprised to find savings from 20% up to 40% and more

 

Deregulated Energy…Communication…Unemployment Taxes…Sales Tax…Property Tax

 

How do we do it…

We know where to look

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by Jeff Rogyom

In today’s competitive business climate, businesses are paying more taxes than necessary and they do so at their own peril.  But when extra cash is needed, the company can hire tax professionals to recover those overpayments through refunds.

By conducting reverse audits on behalf of companies, we have rarely found a company whose tax department didn’t have some oversights, particularly regarding indirect taxes.  Likely targets for recoverable overpayments include the company’s indirect taxes, such as: sales & use taxes, value-added taxes, and excise taxes.  Certain state-specific taxes are also likely cash sources, such as the Maryland admissions and amusement tax which is levied upon the business not the customer.

Understandably, most companies’ tax staff tend to focus on federal and state income taxes.  Some companies even delegate indirect tax responsibilities outside their tax departments, such as to their accounts payable staff.  Focusing on recovering use tax overpayments and fine-tuning the accounts payable systems can create both immediate cash and long-term competitive advantages.

The process generally begins by the company sending accounts payable information to the tax consultant.  The tax consultant will evaluate the information based upon their knowledge of your company and industry.  The tax consultant will then request sample invoices based upon their analysis.  The consultant then indentifies areas with needed improvements and where refunds can be requested.  The refund recommendations may be limited to certain tax jurisdictions where refund benefits outweigh tax liability risks.

While larger companies provide more opportunities for tax recovery, some industries are particularly affected by indirect tax errors given their many available exemptions.  Companies in those industries include: manufacturers, contractors, service providers, non-profits, pharmaceuticals, and other high-tech companies.  There are many areas your company likely has not considered as tax refund sources.

With modern electronic accounting systems, the tax recovery process can be conducted with minimal burden upon company staff.  In addition, many tax consultants may agree to work on a contingency or a mixed-contingency basis.  Given the minimal risk, companies should not hesitate seeking tax recovery services.

Our Perspective:

This is a great article that outlines the opportunity for recovering overpayments of State Sales Tax. We have worked with many companies with great success in this area. Tax laws are very complicated. Let our team of professionsals help. For more information email george@hbsadvantage.com or call 856-857-1230

Excerpts as reported by DEPARTMENT OF LABOR EMPLOYER

System controls and processes need to be improved to ensure t h a t e m p l o y e r experience rates are correct. Employer Experience Rates The unemployment, workforce development, healthcare subsidy and disability insurance tax rates are assigned on a fiscal year basis. The Department of Labor (DOL) uses the “reserve ratio method” in determining tax rates for employers. This method requires a record be maintained for each employer identifying the contributions paid, unemployment and disability benefits charged to their account, and taxable wages. The cumulative contributions less cumulative benefits results in the employer’s reserve balance. This reserve balance is then divided by either the three or five year average annual taxable wages, whichever is higher, to arrive at the employer’s reserve ratio. The reserve ratio is used to determine the employer’s contribution rates based on current rate tables.

A review of 47 of the state’s 250,000 employers’ experience rate calculations for fiscal year 2000 disclosed 12 (26 percent) employers with incorrect calculations, resulting in the wrong assigned rate for four (8 percent) employers. In addition, where problems were noted, we expanded our testing to include a review of rate calculations for fiscal year 2001. Details of our review are as follows:

Certain employer penalty rates need to be reassessed. Employers are assigned a new employer (basic) rate until they have established three consecutive full or partial years of contribution payment experience. Effective July 1 of the fourth year of subjectivity, rates are assigned based on the employer’s unemployment experience history. Specially assigned or penalty rates apply to employers who previously had sufficient experience to receive an experience rate but subsequently paid no contributions on wages for employment with respect to at least one of the last three calendar years used in the rate calculation.  Our testing identified two employers with basic rates in fiscal year 2000 who were assigned the penalty rate in fiscal year 2001 when the EAS failed to recognize contributions paid for the first quarter of operations. Since both employers had filed and paid contributions on time, they should have received a calculated rate. One employer’s unemployment rate increased from 2.8 percent (basic rate) to 5.4 percent (penalty rate). The employer’s unemployment calculated rate should have been 1.4 percent. Additionally, the employer’s assigned disability rate of 0.5 percent should have been reduced to 0.2 percent.

When notified, department management investigated this matter further and identified 9600 employers who had basic rates in fiscal year 2000 and penalty rates in fiscal year 2001. They examined 114 of these employers and found that 50 percent were improperly assigned penalty rates and would have to be manually adjusted. Based on this error rate, a potential 4800 employers could be affected.

System edits do not adequately preclude contributions from being credited to the wrong employer. One employer had contributions for three quarters posted to another employer’s account even though the returns (NJ-927) properly reflected the employer’s identification number, name control and quarter referenced in the encoded data line. This error occurred when DOR registered the employer under their corporation number. This number happened to be consistent with numbers previously used by the DOL for registration numbers. Although DOR subsequently assigned a proper employer identification number, this information was not updated timely in the EAS. When the returns were transmitted to DOL they were matched and were posted to another employer’s account under the old registration number. As a result, both employers were assigned incorrect experience rates.

 These errors could have been detected if: 

 • The DOL had an edit check for reasonableness. The returns incorrectly posted included taxable wages between $3 million and $16 million. The employer whose account they were posted to generally had $20,000 or less in taxable wages.

• The DOL’s edit check for name control had not been turned off. • The EAS was updated in a timely manner.

• The DOL had periodically sent out delinquency notices.

Department management estimates that between 3,000 and 4,000 employers are affected by this type of error and will have to be manually adjusted. The department has changed the EAS programming to eliminate the option to post transactions using either the employer identification number or the old registration number.

The computer system does not automatically adjust employer accounts following a retroactive rate adjustment.

 Manual adjustments to employer accounts are required following a retroactive rate adjustment. These adjustments are often due to employers making voluntary contributions to increase their reserve ratio and thus reduce their unemployment contribution rate. In one instance, an employer’s taxable wages were overstated by $653,000 and cumulative contributions were overstated by $17,000 resulting in the employer receiving a lower rate. This occurred when the employer’s contributions were not properly adjusted and reallocated after making a voluntary contribution.

 The Employer Accounts System is n o t p r o p e r l y i d e n t i f y i n g contributions to be included in the rate calculations. The EAS currently excludes late transactions from subsequent rate calculations.

We noted one employer whose fourth quarter of 1998 payment was received late and was properly excluded in the fiscal year 2000 rate calculation. However, this payment should have been included in the fiscal year 2001 rate calculation, but was excluded.

The fiscal year 2001 calculation should only include account activity attributable to quarters ending December 31, 1999 and prior. Employer contributions overpaid are not included in rate calculations since there are no associated taxable wages to include in the calculation. In one case, an overpayment ($99,000) received prior to December 31, 1999 was reallocated and applied to the second quarter of 2000 and mistakenly included in the employer’s rate determination.

Pr e d e c e s s o r ’ s accounts are not always included in the successor’s experience rate. When an entire organization, trade or business or substantially all the assets of an employer subject to the law are acquired by another entity, the unemployment tax rate of the acquired entity is transferred to the new employer. Thus the predecessor’s contributions paid, benefits paid and taxable wages paid are included in the successor’s experience rate calculation. The same is basically true for disability unless the employer had a private plan. In one case, the successor’s experience rate calculation for fiscal year 2001 did not include three quarters of contributions and associated taxable wages paid by the predecessor. As a result, the successor was improperly assigned a lower experience rate. Department management was unable to explain how this condition occurred. 

Recommendation We recommend the department: • continue their efforts to identify and correct employers who have been improperly assigned penalty rates, • implement additional edit checks to ensure that contributions are posted to the proper employer’s account, • develop a program to automatically update employer accounts following retroactive adjustments, • reprogram the EAS to properly identify and include contributions in the proper quarter when making experience rate determinations, and • modify procedures for successor employer accounts to determine why the EAS is not properly capturing and including all predecessor employer(s) account activity.

Our Perspective:

We have found many instancesthe state has incorrectly calculated the company’s unemployment rate. Many look at unemployment as the cost of doing business. The state will never contact you if they find you are overpaying taxes. The onus is on the company to provide proof of overpayment.

Hutchinson Business Solutions has great success validating the assigned rates are incorrect and securing refunds for our clients.

Is your rate correct?

We offer a free review of your existing rate.

Should we find that an error is made, we will contact the state and take the necessary steps to secure a refund.

Should you like to know more email george@hbsadvantage.com or call 856-857-1230