Category Archives: WA

Why Washington Law Firms Are Receiving Revised Unemployment Rate Notices for 2021

Why Washington Law Firms Are Receiving Revised Unemployment Tax Rate Notices for 2021

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Here’s why, and what your firm needs to do about them.

If you were floored when your law firm received its 2021 unemployment tax rate notice back in December from the Washington Employment Security Department (WA ESD), you’re not alone. Rates skyrocketed. Some firms’ tax rates went up nearly one full percent, even if they had never had an unemployment claim. One of our clients, with no prior claims, saw an increase of SIXTY PERCENT over their prior year’s tax. The good news is, you can expect to see a little relief in your mailbox soon, if you haven’t already.

WA SUI Basics

First, a bit of background. Your WA ESD rate notice includes two tax rates. The first is your State Unemployment Insurance, or SUI, rate. The second is an Employment Administrative Fund, or EAF, rate. The EAF rate is always either .02% or .03%, and it gets added to your SUI rate for your total rate. In this article, we’ll be focusing on just the SUI rate.

Now let’s break down that SUI rate. It’s made up of three sub-rates, and they are:

  • Flat Social Tax. This rate is the same for all employers in Washington. It was .25% in 2020, and by law was slated to jump up to 1.22% in 2021. The only reason it stayed as low as it did is because the legislature capped it back in 2010 – otherwise, it could have jumped even higher. (Your initial rate notice may show .81% in for this rate in 2021, not 1.22%, thank goodness. This is because of how the statute backs out some numbers.)
  • Experience Rating Tax. This tax is different for all employers. The calculation takes into account an employer’s unemployment history, and then assigns a tax based on tables laid out by the legislature. There are 40 categories of tax rates based on an employer’s unemployment history, and those taxes range from 0% to 5.4%. Needless to say, after the high unemployment of 2020, and even though certain time periods in weren’t counted against employers, many employers’ rates jumped up.
  • Solvency Surcharge. This tax only applies if the state’s unemployment insurance (UI) fund becomes insolvent (as defined by statute), and it’s an extra tax designed to rebuild the state’s coffers. Employers haven’t paid this surcharge in years, so it went from 0% in 2020 to the state max of .2% in 2021. Luckily, the state did not add this tax to the first round of 2021 rate notices that went out, so employers didn’t have to factor this surcharge into their sticker shock.

So what this all means is, even if I have a perfectly clean unemployment record, and factoring in the state’s grace in NOT adding the insolvency surcharge, employers’ UI rates went up significantly.

And now to the revised notices…

If we and the UI system in general haven’t confused you enough already, you should have received a revised 2021 UI rate notice. (If you haven’t, contact ESD at the email below. For more confusing fun, the notice doesn’t say it’s revised, so you’ll only know by the February 2021 date on the notice.) On February 8, the state enacted legislation that did a few things to lower the 2021 rates (even though they’re still generally higher than 2020). That legislation included:

  • Capping the flat social tax rate at .50% in 2021 instead of 1.22%.
  • Making more modest increases o the flat social tax rate cap through 2025, up to a maximum of .9%.
  • Suspending the solvency surcharge through 2025.
  • Implementing other rules to reduce employers’ experience rating tax.

A good summary of the changes in the February 8 legislation can be found here.

So, that is why many law firms are receiving revised 2021 SUI rates – the February 8 legislation had an effective date of January 1, 2021. If you have received your 2021 rate notice, be sure to get that to your accountant or payroll provider to make sure your tax calculations remain correct. If you haven’t yet received your revised 2021 rate notice, contact ESD at status@esd.wa.gov.

Payroll can be complicated for small law firms, and become a huge administrative burden. We recommend outsourcing your payroll to a competent, reliable, and simple to use payroll provider. Our favorite for this is Gusto (affiliate link) – click here to learn more.

Why Your Law Firm Needs A Credit Card

Credit Card Basics for Law Firms

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Cash may be king, but your law firm still needs a credit card.

The truth is, your law firm needs a credit card. Your debit card just isn’t good enough. Not only can a credit card boost your credit score, which is crucial when your business requires a loan down the road, but there are countless benefits available to you when the balance is paid in full each month. Here are just a few:

  1. Dispute transactions –  Vendors who don’t deliver or haven’t earned their pay don’t need to be your responsibility. Although it might be tempting to manage your cash flow and expenses using your business checkbook, only a credit card offers protection from transactions that aren’t totally above board.
  2. Lighten your load – As an attorney, you don’t need one more thing to do. By allowing your finance department to take care of bill payments, you can still maintain tight accountability with employee spending limits and expenses without handing over the checkbook. 
  3. Transparency – Concerned about an expense? Want to know whether a vendor was paid on time? Log in to online banking and see exactly who is spending what and with which vendors in real-time.
  4. Act quickly – When you see a spending problem, react in real-time by turning off an employee card or disputing a transaction. 
  5. Manage Cashflow – Cash flow can make or break a law firm. A credit card gives you 30 days of breathing room to manage unexpected cash flow events, before they turn into cash flow problems.

Although a business credit card can make cash flow smooth and easy, it’s vital that spending is managed in the same way you would a debit card. To ensure maximum benefit, be sure to always do the following:

  1. Pay in full monthly – Your business credit card should be used for revolving credit, not as a long-term loan. All law firms should have a LOC (line of credit) available to be used to carry longer-term balances when necessary. Payment terms and interest rates are far more favorable on LOCs than credit cards. Don’t get sucked into easy money. It doesn’t pay.
  2. Set up auto-pay – Don’t trust yourself or even your finance department to pay your credit card bill on time. There’s just no reason to risk carrying a balance. Auto-pay is one of the few things our computer overlords have perfected. Take advantage of it. Every credit card offers the ability to set up auto-payments that absolutely guarantee you will never incur a late fee. You can set them up to pay the minimum balance or the balance in full. Paying the full balance every single month is always better, but some firms have cashflow that’s variable enough that the autopay for the minimum balance is a safer bet.

Now that you know the basics of establish credit for your law firm, you’re ready to make sure your business credit card is truly a profit center and not an expense. But don’t be fooled, not just any card will do. Selecting a company that offers the terms, conditions, and benefits that fit your business is strategic. Thankfully, we have loads to share on that topic as well. Sign up for our email list to make sure you don’t miss our insider tips on how to choose the right credit card for your firm.

Got questions about credit for your law firm? We’re here to help. Schedule your 15-minute consultation today.