With a record number of claims for unemployment benefits over the past few years, state agencies have become increasingly vigilant about protecting taxpayer assets from fraud. This recent case illustrates the importance of diligent record-keeping and accurate reporting.
One of our clients terminated her employee, Claudia. Within a couple of weeks, we received a notice from the Colorado Department of Labor indicating that Claudia had filed for and was receiving unemployment benefits. This particular notice asked for the employer to respond with Claudia's last day worked and her wages earned during the current quarter.
We provided the client with the requested information, along with copies of all her payroll documents. The documents gave a detailed listing of the exact number of hours worked each week as well as the date of last wages paid and Claudia's severance check amount. The client forwarded the documents to the Department of Labor.
A few weeks later, we received another notice from the state on behalf of the client. It stated that Claudia had given false information when she applied for the unemployment benefits from the state.
When an employee is let go from a job due to no fault of her own, she has the option to apply for unemployment benefits from the state. The state then goes through a verification process to decide whether or not she is eligible to receive the financial aid. The claimant (employee) is generally NOT eligible to collect benefits if she left employment for one of the following reasons:
- She voluntarily quit
- She was discharged with cause
- She already has another job
- She was hired as a student during school vacation
Since the client was able to provide detailed copies of the payroll documents, the state case worker was able to make a prompt determination about Claudia's benefits without any additional involvement from the employer. (If employers are not able to provide clear and compelling payroll records, they typically get consumed by meetings with the case worker to iron out the discrepancies).
In this case, Claudia had intentionally misrepresented her termination date as well failed to report the severance pay in an effort to get more money from the state. The state launched an investigation about the misrepresentation of wages as reported by Claudia.
They found that the under-representation was intentional, and they disqualified her from receiving any future benefits for a specified amount of time. Additionally, Claudia was required to repay the benefits she had already received from Colorado with interest.
How the Whole Thing Could Have Been Avoided
In this case, the family did everything right. As a result, they were able to avoid serious tax evasion problems -- Claudia's filing for unemployment would have triggered an audit if they had been paying her "under the table." Also, by keeping timely and accurate payroll records, the family was able to avoid getting entangled in time-consuming "he-said, she-said" meetings with the state Department of Labor.
If you have additional questions, please call 888-BREEDLOVE (273-3356) or visit http://www.mybreedlove.com/.