If Your Time is Short
The Department of Labor in New York State has officially begun to mail out notices en masse to business owners everywhere, starting July of 2022.
The notice will look something like this:
Now New York is using the IAS 2022, or Interest Assessment Surcharge to help pay off the interest newly accrued debt from borrowing Federal money during the pandemic to make unemployment payments. Essentially, this surcharge applies to all business owners that pay towards unemployment insurance.
If you are an employer that pays towards unemployment insurance in New York, you will now be required by law to pay the IAS 2022 fixed annual interest rate of .23%, which on average works out to about $28 a year per employee. Employers such as yourself will be expected to make these payments until all the interest for these pandemic loans are paid in full.
You can pay the surcharge online by setting up your own NY UI (New York unemployment insurance) service account here, or simply do so while e-filing your 2022 NYS-45 tax return.
The Deep Dive on the IAS 2022
How Did This Happen?
The pandemic caused a lot of problems, and even though we are at the tail end of it, we are just starting to realize the long-term damage. To put it bluntly, New York wrote a check that their butt couldn’t cash.
Despite the New York State Department of Labor paying out more than $105 billion in unemployment from 2020 to 2021, the NY UI fund could still not meet the demand. This is understandable considering that New York had not seen those levels of unemployment since the Great Depression.
This unprecedented emergency dried up NY UI funds rapidly. To make up the difference, New York followed suit with many other states and borrowed money from the federal government to make these unemployment payments.
According to the New York Department of Labor, despite New York State’s aggressive strategy to pay back this federal debt, they have still only managed to pay back $1 billion of the $9.2 billion owed.
In order to prevent being overwhelmed with spiraling debt from interest, New York has made the executive decision to require by state law that employers pay an annual Interest Assessment Charge, also known as the IAS 2022.
How is the IAS 2022 Charge Rate Calculated?
The surcharge is calculated based on the wages that count towards NY UI (New York unemployment insurance) contributions for the payroll year, starting with the fourth quarter of 2021. Currently you take the sum of all those wages and multiply it by the IAS rate of .23%.
It is important to note that the IAS rate may fluctuate each year depending on several factors, including:
- The outstanding balance of the loan
- The federally set interest rate
- The amount of wages that are counted towards contributions
Is My Business Required to Pay?
If you own a business that operates in New York, and you pay unemployment insurance to the state, then yes, you are REQUIRED to pay the IAS. If your business ends up owing less than $1, then you will not be billed for the surcharge.
How Long Am I Expected to Pay for This?
Not only will your business have to pay the IAS for the current payroll year (4th quarter of 2020 to the 3rd quarter of 2021), no one is quite sure how long this surcharge will last. That is because the payments will continue to be required until the current balance of the loan, $8.1 is completely paid off. Because of the uncertainty of the financial climate, no one can say with certainty when that will be.
What Happens if I Don’t Pay?
There are consequences a plenty if the interest rate is not paid. The economy is powerful, yet fragile. A problem in one area often creates a domino effect. If this interest is not paid, New York would be in jeopardy of losing its federal certification for the Unemployment Insurance Program.
This may not seem like a big deal at first, but losing that certification means that New York would no longer receive a 5.4% tax break credit on the Federal Unemployment Tax Act. This means that employers would experience a huge spike in payroll taxes, much more than the .23% rate for the IAS 2022.
Has This Ever Happened Before?
Yes, it has. As a matter of fact, the New York Labor Law Article 18, Title 6, Section 581-d has been implemented several times over the years in New York to help with similar issues in 2003, 2004, 2005, and 2011.
When is This Payment Due?
In general, the interest payments for federal loans are due every year on September 30th. The only exception is when the federal government suspends interest accruals, or the whole balance is paid off before additional interest is charged.
In essence, the IAS 2022 is treated the same as any other federal collection process, which includes legal precedent for debt enforcement. In this instance, payment extensions cannot be granted by any other agency than the federal government.
What If I Didn’t Receive my IAS Bill or Don’t Understand it?
If you have additional questions regarding the NY UI, the IAS surcharge, or other labor law questions, it is best to get clarity by calling the New York Department of Labor’s Employer Hotline at 1-888-899-8810. When prompted, select option 1 to get to the main menu, then option one again will take you to the Unemployment Insurance Division. You can also get answers about the IAS online, here.
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