Unemployment Taxes: Don’t Try This Illegal Texas Two-Step

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in Small Business Tax,Small Business Tax Deduction Strategies

The Texas Workforce Commission (TWC) recently announced that the agency has recovered nearly $1.8 million in unpaid unemployment insurance taxes from employers. TWC identified the delinquent employers by using new software technology designed to detect illegal tax-avoidance schemes.

According to the agency, some employers attempt to manipulate the system by moving their payrolls to a new company. The new business is then taxed at a rate that does not include unemployment insurance liability, resulting in a lower calculated tax rate.

The state will deposit the $1.8 million in reclaimed funds back in the Unemployment Insurance Compensation Trust Fund.

Advice: Don’t try this version of the Texas two-step. TWC’s software will be a step ahead of you. Many states have gotten wise to employers trying to shed their workers’ comp claims history by creating a new entity. It may work in the short run, but it is increasingly likely you will get caught.  

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