Department of the Treasury

Reduce Employer Reporting Burden

Innovation: Simply stated, the purpose of this suggestion is to reduce the employer reporting burden for those firms having employees in multiple states. In addition, this action would reduce federal costs to process this information; reduce over payments to the unemployed; and, expedite payments to families with child support payments where the worker and the support recipient live in different states.

 

The federal government has oversight responsibility for the state Unemployment Insurance programs but states are allowed flexibility in these operations. States have their own numbering systems to register and identify employers. The states also maintain the Federal Employer Identification Number (EIN) assigned to these employers by the federal government for employers to receive a credit on the taxes owed under the Federal Unemployment Trust Act (FUTA), passed 70 years ago. The IRS collects this information from employers on their annual 940 form and states must verify the amounts paid by the employers to their state. Thus, the states have the EINs for most of their employers. I propose that the federal government mandate that the states only use the EIN to identify employers. State Unemployment Insurance Numbering systems are very diverse and cumbersome. Use of the EIN would facilitate the annual tax verification process. It would also reduce the costs of employers operating in more than one state and make them more competitive globally. Each employer would use the state FIPS code and EIN to note the state where reports and payments are due. This action would also expedite the sharing of New Hire data across states resulting in fewer Unemployment Insurance over payments (reducing fraud) and quicker incorporation of approved Child Support payments.

 

States would still maintain their own Unemployment Insurance laws but use the State FIPS and EIN to process and store their employer information and share it with the IRS and state agencies, as required by law.

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Idea No. 10656