Manipulating Unemployment Tax Rates To Pay Less Tax.
SUTA dumping is a scheme by which some employers manipulate the state Unemployment Insurance Laws in order to pay a lower UI tax rate. The scheme compromises the integrity of the UI tax system. It creates a distinct competitive disadvantage to employers who comply with the law by placing a higher tax rate on them in order to maintain the trust fund balance.
The main methods of SUTA dumping are accomplished when employers shift the charges from their individual experience to the general experience of the whole unemployment insurance fund. This spreads the costs that would normally be allocated to an individual account, to the accounts of all experience rated employers.
Although only a small number of employers are involved in SUTA dumping, all employers are impacted. Therefore Public Law No. 108-295, the “SUTA Dumping Prevention Act of 2004” was signed by the President on August 9, 2004. Mississippi’s law was changed in the 2005 Legislative Session to address this illegal practice. Violators will face stiff fines. Employers who participate may be fined up to $10,000 for each incident and may be imprisoned for up to five years or may have their tax rate increased to a maximum of 7.4% (2 percent above the statutory maximum). Individuals who are not employers but participate in this practice (accountants, attorneys, etc ;) may be fined up to $5,000 for each incident.
See Section 71-5-355. (3) of the Mississippi Department of Employment Security Law for more information regarding SUTA dumping.