Surprise! You Owe More Taxes

| News | December 14, 2017

Debra Goldberg is a bookkeeper and Deborah Grandinetti is president of a payroll company, so they are aware of the dirty little secret employers are reminded of this time of year.

The unemployment insurance tax.

Because California has not repaid the federal government its loan from the Federal Unemployment Trust Account, or FUTA, employers are on the hook this year for up to $147 per employee.

“For me, I’m prepared,” Goldberg said. “I know our governor has been a jerk — can I use those words? — since 2011. I’m aware the percentage goes up, and this year it’s 2.1, and I prepare my clients for it.”

That doesn’t mean anybody’s happy about it. Goldberg has clients who owe $9,000. The Gazette owes $1,029; The Signal about $5,145.


That’s a pittance compared to Chris Angelo, CEO of Stay Green, which offers professional landscaping services. He owes $63,110.93, according to an email.

“It’s frustrating, not surprising,” he said calmly. “We’ve been paying it the last two years. It’s one of many hidden fees we’ve seen.”
Goldberg said many of her clients “are angry as heck and want to know why.” According to Grandinetti and several online sources: When the economy tanked in 2008, unemployment benefits were extended beyond the normal number of weeks. When state monies ran out, 20 states borrowed from FUTA, into which employers already pay. California borrowed more than $3 billion in early 2009 and had two years to pay it back. Because it didn’t — and it’s the only state that hasn’t, although the Virgin Islands also owes — it must pay 6 percent of the first $7,000 of an employee’s gross wages. But that gets dropped to .6 percent after an employer files Form 940 with the Internal Revenue Service.

However, for every year the debt is unpaid, the percentage owed goes up .3 percent, so it’s currently at 2.1 percent, or $147 per employee. Next year, it will be 2.4 percent, or $168.

“When you have 100 people, you’re talking substantial amounts of money,” said Grandinetti, president of Payroll Providers in Valencia. “We have clients who are looking at $30,000. … The federal government is penalizing California businesses because the state couldn’t pay.”
Business owners have until Jan. 31 to pay, she said.

“It’s a tremendous burden for business owners, especially small businesses,” Grandinetti said.

Nonprofits are exempt, said Tom Christensen, CFO of Samuel Dixon Family Health Centers, Inc., but he still called the tax “ridiculous.” Cities are also exempt, said City of Santa Clarita spokesperson Carrie Lujan.

City Councilperson Bob Kellar, who owns a real estate company but has no employees, thinks this is another example of state mismanagement.

“The state is out of their ever-loving minds,” Kellar said. “You wonder why we have all the homeless and all the mess we have out here. … Thank God we run the city better than they do in Sacramento.”

Angelo said he wishes it would be as easy as calling his representatives and demanding the loan be paid, but what he sees as a dearth of “fiscally responsible legislators” makes that unlikely.

Neither Assemblyman Dante Acosta nor Sen. Scott Wilk responded to interview requests, although Acosta told Gazette publisher Doug Sutton last week he didn’t know anything about it, and a representative in Wilk’s office asked for specific details to take to Wilk. Angelo said Wilk is pessimistic that a resolution could be reached soon.

Christy Smith, who’s again challenging Acosta for the 38th district next year, said it’s something that needs to be addressed because small-business owners are paying the brunt, and she thinks it’s not fair.

“We owe it to small-business owners to keep them functioning,” she said, adding she finds it unfair that corporate millionaires and Wall Street tycoons were bailed out, but now the mom-and-pop stores are not. “We need to be listening to their concerns.”

Goldberg said she knows of no clients who are laying off employees to avoid paying the tax, but “I’ve heard of employers tell employees, ‘Sorry, no bonus because I’ve got to cough up $9,000,’ which doesn’t make employees happy at Christmastime; or they get a significantly decreased bonus.”

Angelo said to expect “a significant amount more” in fees for his company’s services.

“It’s not a business state. It’s a pro-union, pro-employee state,” he said.

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About Lee Barnathan

Lee Barnathan has been a writer and editor since 1990. His articles have been published in newspapers, magazines and online. His new book "If You Experience Death, Please Call and Other Fatal Mistakes We Make With Language," a humorous look at the ways people misuse English, is available on Amazon or at his website, www.leebarnathan.com. He is hired by people all over the country to help them refine the message or story they wish to share with their target audience or demographic.

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