Possible UI Overpayment - Question about Bonuses (file, receive, claim)

[ucbedge]

Hello,
I'm a resident of Colorado. I was involuntarily laid off from my employer in Sept 2014. I immediately applied for UI benefits, and began receiving them from Oct 2014 until Mar 2015, when I found other employment.

I received a bonus check from my old employer five months after I was laid off - in February 2015 - based on company performance (all employees get an annual bonus dependent on the company's previous year's margins/profits). I cashed the check, but didn't even think to report it as Wage Income on my weekly UI claim. I just received a "Claimant Inquiry" from the Dept of Labor/Employment accusing me of receiving UI benefits to which I wasn't entitled for the week this bonus was given.

Essentially, does a bonus paid based on company performance and given out five months later count as wages? Also, do I have to worry about penalties? It really was an honest mistake and the amount we're talking about is small ($1k).

Thanks in advance for all help and advice!

[Chyvan]

Doesn't matter if it's an honest mistake. If you handle it wrong, it will be a very expensive mistake.

In UI, wages are work for remuneration. In the strictest sense, this is NOT wages. Hold your ground and fight it. You make the claim that you didn't do a stitch of work to get it, and if the time the bonus represents is prior to your last day of work, then it's no different that the paycheck two weeks after you get fired. It's not attributal to the time for which you were claiming even though it was received during that time.

Don't count on your UI worker handling this matter to be all that smart. They are too used to people claiming while receiving income, so be prepared to let the UI worker think the worst of you, and take it up on appeal with someone that's actually paid to think.

The bonus is taxable, it is reportable, it might look like wages to the UI computers, but it is NOT.

[Rabrrita]

Colorado treats bonuses like wage compensation. So, technically you were supposed to have reported it to Colorado unemployment the week it was received by you. However, you can make an argument (many do) that that the amount of that payment was already reported (true or not) to the state under CRS 8-4-109 (1) and (2). Those sections require the employer to pay any determinable commissions, bonuses, or other compensation upon termination of the employee. So from your position, you already thought that amount was reported by the employer when they reported your final paycheck amount. Just stick to always hearing how any bonuses and other compensation had to be paid at termination. In your case, you thought they reported it as earned even though you have not received it (just like reporting wages when earned versus when received). It won't get you our of the over-payment, but will get you our of any penalty or fines. You may want to look a bit closer just in case CO has changed their definition of "compensation" to start excluding these non wages worked extras.

[ucbedge]

Thank you both for your replies.

I guess I'm confused about this part of Rabrrita's reply: "In your case, you thought they reported it as earned even though you have not received it (just like reporting wages when earned versus when received)."

What distinction (if any) do they make between wages/bonuses earned versus wages/bonuses paid out? I clearly "earned" this bonus prior to being laid off or receiving any unemployment benefits. It just so happened that the company didn't cut me a check until several months later when I was actually receiving unemployment benefits. What if they cut me the check two months later - after I found other employment and discontinued my UI claim...would I still have to report that to the State? It seems odd it's based on the timing of the check, not when the earnings period was.

Also, does anybody know the statute of limitations on an UI audit in CO? I got my years wrong in my OP - I got a "Claimant Inquiry" notice in October 2015 when my benefits began more than two years ago (Sept 2013).

[Chyvan]

Originally Posted by ucbedge

"In your case, you thought they reported it as earned even though you have not received it (just like reporting wages when earned versus when received)."

She might expand on it more, but for now, what she means is that when you file a claim for UI, the state sends out a form to the employer to ask about things like:

How much is your last check?
How much vacation did you pay out?
Did you pay a severance?

There's a lot of questions so that when this money gets reported for tax purposes (which can be months later than your claim for UI) the UI people will be able to reconcile things.

She might be absolutely right that there is nothing you can do to avoid an overpayment. What her advice will allow is for you to be blameless in the matter, and therefore, it can't be treated as fraud and no fraud penalities can be assessed against you.

My position is that you argue tooth and nail that this situation is more analogous to an underpayment of wages and/or a gift. Let's say for a year that your employer paid you $10/hr, and then they realized the mistake and paid you an extra $1 per hour for all the hours you worked up until the day you were let go. In that case, it wouldn't be wages received during your time of UI, but wages for a time in the past. Alternately, there is the fact that you didn't work to get. Look at your weekly UI certifications. The question may be did you "work" or "earn any money." For the same reason that you wouldn't report to UI interest on your bank account as earned income or rent that you might have received for a room in your house because you didn't work or it. I suggest this because I don't want you to pay anything back, not just be worried about being accused of fraud or having penalties. I also might be entirely wrong, but I still think you should try.

Originally Posted by ucbedge

What if they cut me the check two months later - after I found other employment and discontinued my UI claim...would I still have to report that to the State?

No, because you wouldn't have been in claim status.

Originally Posted by ucbedge

It seems odd it's based on the timing of the check, not when the earnings period was.

Just try to accept it. They can't really tell by looking just at the date of the check where it belongs.

For purposes of calculating wages in a base period, it's the date on the check. For purposes of reporting it, it's when you earn it, as opposed to when you were paid for it, and why I suggest you put up some resistance.

Originally Posted by ucbedge

does anybody know the statute of limitations on an UI audit in CO?

We're not sure if there is one. You're not the first one, and probably won't be the last to have stuff dredged up years later. The record so far was someone that had an overpayment in TX that they tried to deduct from his current benefits 15 years later. However, he'd filed BK in the interum and had a valid reason to try to get that attempt stopped.

Regardless if Rabrrita's less optimistic view proves to be true, if this gets treated as a nonfraud overpayment. Please come back so I can share my tips so that you can try to stiff them on the debt.

[Rabrrita]

Let's take each one by one.

First, in CO, all monies you get from your employer is considered wages under the law. Your pay, paid vacation, paid sick, bonuses, commissions, severance packages, etc, etc are all wages. As such all of it has be be disclosed to unemployment. The exception is only reimbursements for expenses.

Second, under CO law, an employer is required to pay a terminating employee all monies owe and due at time of termination. The exception is any amount hat can not be determined until later. So, if the bonus was $X for each year of service, they could compute that regardless when that bonus is actually paid. They technically should have reported such bonus to unemployment with your finial wage report. Now, if they can't determine the dollar amount until end of years P&L are filed, they pay and report it to unemployment when actually paid.

Third, it sounds like yours was the second where they could not determine the exact amount until the end of the year. In that case, they pay you when bonuses are paid, report it to unemployment, and you report it to unemployment when you get he bonus and know the amount. You were required to report that money and failure to report it resulted in an overpayment. Most states don't leave over-payments well enough alone, no they go and start using it to make money through penalties and interest by claiming you committed fraud by failing to report the money.

Fourth, if you are required to report it and didn't, you will have an overpayment. But there's no reason to pay any penalty or interest because you can make the case that because this is a automatic yearly payment, you thought the employer did report it when you were terminated. You had no idea it wasn't reported way back when. You can also use the logic that unemployment expect you to report wages when you earned it not when you received it. So, since you honestly thought the employer had already reported the bonus back when it was earned at termination, all you figured was they finally got around to paying you the already earned and reported amount.

Does this make sense?