You can’t fight City Hall, and don’t even think about fighting the IRS
If you are in business and have employees, you pay unemployment tax. It’s based on how much you pay your employees – with a credit reduction to the federal government of the amount you paid on your state unemployment.
Back in April, I got an Internal Revenue Service notice that we owed money on last year’s federal unemployment. I had paid my federal unemployment tax timely each quarter so I was a bit dumbfounded – and disturbed – by the notice. To try to understand why I “owed” more money, I wrote a letter to IRS asking for an explanation.
Surprisingly, the IRS responded.
According to the feds, North Carolina borrowed from the federal government to pay unemployment benefits in our state as a “credit reduction state” whatever that means.
In other words, because North Carolina had not repaid money it borrowed from the federal government to pay unemployment benefits, I now owed more money because of the “credit” I took on my payment of unemployment tax to the feds.
The IRS explained that the amount I owed was not a penalty and could not be removed. However, further down in the letter, they stated the amount I now owed – in addition to what I paid – and this “includes penalty and interested” figured until a date they gave me to pay the bill.
Bottom line: because North Carolina owes money to the feds for spending too much on jobless benefits, I now have to pony up more cash – even though we had NO unemployment claims against our company.
We’re a small business, but can you imagine how this kind of unexpected notice hit some of the bigger companies in North Carolina.
I don’t know about you, but I tremble in my boots if I get a notice from the IRS. And while paying taxes is part of a business…well , is part of life…it seems like the federal government gives big business a break or a stimulus package or a loan, while the rest of us just have to deal with this sluggish economy and do the whatever we can to get by.
At any rate, it’s frustrating and as the saying goes, impossible to fight city hall …or the IRS!