State Tax Committee meets with state Office of Unemployment, Department of Assessments and Taxation

By Cindie S. Rosenzweig, CPA, MS
Member, MACPA State Tax Committee

On Aug. 21, 2002 the MACPA State Tax Committee met with the Maryland Office of Unemployment (Maryland Unemployment) and the state Department of Assessments and Taxation (SDAT).

The meeting opened with Dennis Morton, director of contributions for Maryland Unemployment, who informed the committee that the estimated trust fund balance as of Sept. 30, 2002 is expected to be $848 million. At the time this article was written, Maryland Unemployment indicated it could not be determined if the trust fund balance would be enough to avoid a surcharge for 2003. The current rate range is three-tenths of 1 percent to 7.5 percent, with the new employer rate being 1.8 percent. The wage base remains $8,500.

Mr. Morton invites businesses and practitioners to visit the Maryland Unemployment Web site to obtain information about online filing and other unemployment issues, including answers to frequently asked questions. The Web site can be found at www.dllr.state.md.us.

If the desired information cannot be found on the Internet, do not hesitate to contact the Maryland Unemployment office by telephone or e-mail. Maryland Unemployment makes every effort to answer all telephone calls within 24 hours. Please leave a return number and the name of a contact person with your message when you call. Please use e-mail to correspond with Maryland Unemployment whenever possible, because e-mail is the preferred medium for correspondence.

Mr. Morton reminds all employers and their advisors of the importance of accurate personnel records and timely response to correspondence from Maryland Unemployment, especially during this time of economic downturn. It takes only a minimum of chargeable benefits to have a significant adverse impact on a small employer's rate. For an employer with one employee, just three weeks of maximum benefits per year for three years can result in the employer being assessed at the maximum rate. If an employer has 10 employees, one 26-week claim per year for three years can result in the maximum unemployment rate. Accordingly, the importance of answering all correspondence from Maryland Unemployment — especially the request for separation information and proper documentation of personnel files — cannot be stressed enough. The validity of chargeable benefits must be challenged immediately upon notification from Maryland Unemployment. An increase in the employer's rate resulting from chargeable benefits takes three years to wash out. Once an employer receives a rate notice, the details involved in the calculation cannot be challenged. Information about chargeable terminations can be found on the Maryland Unemployment Web site.

Next, three SDAT representatives — Program Manager of Personal Property Edward Muth, Assessments Supervisor of Personal Property Michael Griffin, and Supervisor of Unincorporated Personal Property Phyllis Levi — made their presentation.

The SDAT officials discussed new legislation passed by the 2002 General Assembly. The most significant legislation was House Bill 588, which changed the rules on correcting prior-year assessments. Businesses may file amended returns to correct errors and claim missed exemptions within three years of the April 15 that the return was originally due. The three-year provision does not apply to manufacturing exemptions. Prior law only allowed one year for filing amended returns for any missed exemptions.

Businesses must apply for the manufacturing exemption by Sept. 1 for the exemption to be applicable for the current year. If a personal property return must be filed prior to receiving the approval for a timely filed manufacturing exemption application, report the manufacturing assets on the manufacturing portion of the personal property return and attach a statement to the return stating the manufacturing exemption is pending.

The new law was effective July 1, 2002. Information about the new legislation as well as other valuable information can be found on the SDAT's Web site, www.dat.state.md.us.

The SDAT officials offered a few reminders. Extensions to file personal property returns can be obtained via telephone. Due to budget cuts, phone extensions may not be available after the 2003 filing season. The SDAT encourages businesses and practitioners to file extensions via the Internet. A confirmation will be given and can be printed out. It is best to file the extensions as early as possible as all of the systems (including the Internet) may be busy around April 15.

The SDAT has stepped up its efforts on the discovery program. A program matching the comptroller's files (such as sales tax filers) with personal property filers is in place. Localities also are assisting in locating businesses that are not properly filing personal property returns. The SDAT strongly advises non-filers to come forward via the voluntary disclosure program. Businesses that voluntarily come forward will be required to file the current year plus three prior years returns. In addition, the 20 percent penalty for escaped property will be waived and all but the most recent late filing penalty will be excused. Once a business is contacted by the SDAT, the business will not qualify for the voluntary disclosure program and will be required to file all applicable prior years' returns and be subject to all applicable penalties.

The MACPA State Tax Committee thanks the representatives from Maryland Unemployment and the SDAT for their time in preparing for the meeting and for the informative presentations. These meetings allow committee members to meet personally with the representatives of the departments and provide an informal forum to discuss issues that concern all practitioners and businesses.

The State Tax Committee also thanks Dennis Morton and Michael Griffin for their assistance with this article. As always, the State Tax Committee appreciates the continued favorable working relationship we have with these departments.

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