TPUSA, Inc. operated a call center and had employees in Indiana until September 30, 2009. It filed all quarterly wage reports for unemployment insurance purposes and remitted all unemployment tax for which it was liable through that date. The company filed a wage report for the fourth quarter of 2009 showing that it had no Indiana employees and paid no Indiana wages. That was the last quarterly payroll report it made to the Indiana Department of Workforce Development (IDWD). After no reports were filed in 2010, IDWD assessed more than $125,000 in tax, interest, and penalties based on an estimate for that year. TPUSA protested, the liability administrative law judge (LALJ) upheld the assessment, and TPUSA appealed. On April 18, 2013, the Indiana Court of Appeals held that because the employer had ceased operations and no longer paid wages to employees in the state and made accurate and reliable reports indicating as much, it did not owe the assessed amount based on IDWD’s estimate.
When an employer ceases its employment activities in Indiana, IDWD regulations require that the employer immediately notify the agency and file the necessary wage and tax reports. See 646 Ind. Admin. Code 3-1-6(a). Reports for an employer’s last quarter should be marked “final report.” Id. In this case, the employer did not mark its final report. When IDWD did not receive reports from the employer in 2010, it issued notices to the employer warning of a possible penalty and then assessing additional tax, interest, and penalties. But the statutes allow relief from penalties upon a showing of “reasonable cause” for failing to timely file reports and submission of accurate reports. Ind. Code § 22-4-11-4.
IDWD determined that filing a $0 report for fourth quarter 2009, shutting down the Indiana operation, and failure in receiving IDWD notices in the right hands did not add up to reasonable cause for believing that 2010 wage and tax reports did not have to be filed. The Court of Appeals disagreed. Recognizing that TPUSA failed to mark its final report properly, the court concluded that the employer should not totally escape penalty, and so the court remanded to the LALJ to cancel the $125,000 assessment but to assess more appropriate penalties totaling $200 pursuant to Indiana Code § 22-4-19-10 for negligent failure to submit a report for proper administration of the unemployment insurance provisions. This, the court said, would help to avoid the “absurdity” of requiring a payment exceeding $125,000 from an employer on an account upon which it did not owe anything.