The statute of limitations restricts how far back the commission can go when collecting past due taxes and quarterly reports. Section 213.033(a) specifies that the commission cannot go back further than three years. An employer may voluntarily report and pay tax on quarters outside the statute of limitations, but they have no legal mandate to do so. When in contact with an employer, inform them of the statute of limitations if asked, but do not advise them to pay or not to pay for periods outside the statute.

The statute of limitations is determined by the current calendar quarter or the quarter in which the transaction is being recorded. In Status the current calendar quarter will almost always determine the statute.

To determine the oldest quarter within the statue of limitations, subtract three years from the current calendar quarter.

If the current calendar quarter is the third quarter of 2009, the oldest quarter within the statute of limitations will be the third quarter of 2006.

When establishing a new account or reopening an account it is important to determine the statute of limitations for purposes of coding the report grid. If the employer has paid the tax due and penalties on all quarters prior to the statute, quarters should be coded "1".  You must have approval from the Assistant Section Manager or Unit Supervisor before taking this action.

If Field Tax or employer submits Quarterly Reports for periods outside the statute of limitations without the tax due, send an e-mail to ADP & Audit to delete reports out of statute. Establish liability only back to statute and document FTC.  It is not necessary to contact the employer.

When an account is reopened, only reopen the account back to statute and code quarters from reopen date to present.

For example, if we are presently in the third quarter of 2009 and you are reopening an account as of 7-01-06, the system would only require coding of quarterly report liability from the third quarter of 2006 through the current quarter.

Sometimes an employer is liable, but all quarters of liability are outside the statute of limitations. If the employer does not want to voluntarily pay the tax due, the statute of limitations prevent the commission from collecting the past due Quarterly Reports and taxes. You must have approval from Assistant Section Manager before taking this action.

If the employer became liable for state unemployment taxes, but all quarters of tax liability are outside the statute of limitations, access the STA screen and make the account "Not Liable". Document FTC to show that all liability is outside the statute of limitations. Send an e-mail to ADP & Audit to delete any reports that are posted.

For federal unemployment tax purposes the employer may want to voluntarily pay the state unemployment tax due. The IRS allows a partial credit for paying late. If the employer became liable for state unemployment taxes and all quarters of tax liability are outside the statute of limitations, access the STA screen and make the account "Liable" only if the employer voluntarily pays the tax due and penalties on all quarters. Document FTC stating that the employer desires to pay tax due on periods outside the statute of limitations. Since the system will not properly assign extended due dates to quarters outside the statute of limitations, request ADP & Audit to review and correct the extended due dates.  You must have approval from the Assistant Section Manager before taking this action.

The statute of limitations is determined when liability for an account is first established. The initial quarters of report liability do not change unless liability dates are changed.

For example, consider an employer who became liable 3-31-05, but did not register with the commission until the third quarter of 2009. This employer is required and will always be required to report and pay taxes beginning with the third quarter of 2006.

If the initial liability dates are changed, the statute of limitations is determined by the quarter in which the change is made.

For example, consider an employer initially assigned a liability date of 3-31-08, who submitted a Status Report, during the third quarter of 2009, showing liability as of 3-31-05. This statute of limitations for this employer is computed based on the quarter in which the liability date is changed (third quarter of 2009). This employer is required and will always be required to report and pay taxes beginning with the third quarter of 2006.

The intent behind the Employer Master Record (STS) screen is to detail the period(s) in which an employer had liability to pay state unemployment tax. In establishing a new account where actual liability is earlier than the three-year limitation, the liability date will be the date the employer first incurs liability within the state. The first wages date will be the date wages are initially paid within the statute.

Example #1:

A common paymaster situation that has been in place since 1999 is discovered during a routine status investigation in August of 2009. Separate accounts for each legal entity identified other than the original account will be established based on liability incurred only within the three years prior to the investigation. Total Rate Transfer is not applicable.

Liability Date= 07-01-06:  First Wages Date= 07-01-06

The $9000 Taxable Wage Calculation will begin 07-01-06. Wages paid prior to 07-01-06 will not be taken into consideration.

Example #2:

In August 2009, TWC discovers that an employer incorporated their business four years ago. The Tax Rate transfers. The new account will be established as follows:

Liability Date=07-01-06: First Wages Date=07-01-06

Wages paid prior to 07-01-06 will be used to calculate Taxable Wages.

Example #3:

In August 2009, TWC learns that an employer began business with employment five years ago, incurring liability under 201.021 of the Labor Code, in the first year of business. The new account will be established as follows:

Liability Date=07-01-06: First Wages Date=07-01-06

The $9000 Taxable Wage calculation will begin 07-01-06.

Further consider an established inactive account, which resumed paying wages on 7-01-04, but did notify the Commission of the resumption in activity until the third quarter of 2009. The statute of limitations prevent the Commission from collecting reports or tax prior to the third quarter of 2006. In this situation it is proper to use the statute date of 07-01-06 for the reopen dates when updating the EMF.

If the predecessor account is closed or terminated prior to statute, and an acquisition occurred before statute, no acquisition will be processed back to statute. This is not the same as Example 3 above in Chapter 6 – "Liability Dates".

If employer request the acquisition be processed on out of statute accounts this must be approved by your supervisor.

Notes: If you find that an account should be reclassified as an error account and if there are out of statute quarters posted to the account do not reclassify the account as an error account. Inactivate the account back to statute. Reason: We will not refund out of statute money. Document FTC.

How to determine what date to use when setting up an account:

• If the field has submitted the C-1 and C-3’s, use the FL-204 date. If no C-3’s were submitted use the current date to determine the subject date.
  
  
• If the employer submitted the C-1 and C-3’s then use the date on the C-1. If the C-1 is not signed use the transaction date on TDO for the C-1.
  
  
• If the employer submitted the C-1 and no C-3’s then use the current date to determine the subject date.