Colorado small businesses want answers after being charged penalties and interest they say they don’t owe

Colorado small businesses claim they are being overcharged on their unemployment insurance taxes.

The issue stems from a glitch in a new state computer system that companies are using to report information on wages and employment to Colorado. The data on wages is used to calculate how much in taxes businesses have to pay into the unemployment insurance fund.

In April, businesses started to receive notices from the state alerting them to interest and penalties owed on unemployment insurance taxes, according to Tricia Petteys, the cofounder of Payroll Vault Franchising in Littleton. Her company provides payroll services to roughly 1,000 small businesses across Colorado. That service includes making sure employees get paid, as well as remitting tax payments to the government.

“We knew we had already made the payments, that there shouldn’t be any balances due, and we were very confused over what was going on,” said Payroll Vault’s tax resolution specialist Jolinda Sumrall.

A customer service representative at Colorado’s labor department told Sumrall there were problems transferring data from previous years into the new computer system. Some of the information got scrambled when it moved over, according to the representative, leading to incorrect Social Security numbers being entered in the system and inflated wages. The erroneous wage data is what’s leading to the state’s demands for interest and penalties, according to Sumrall.

There are errors in data submitted as far back as 2019, according to Sumrall. Roughly 30 percent of the company’s clients are experiencing the problem. The state instructed Sumrall to go in and manually re-enter the correct data.

“I have 300 to 500 of these … I don’t have time to go in and just manually enter in data for certain employers,” Sumrall said.

Sumrall was directed to a different person at the labor department for further assistance. But, according to Sumrall, that employee’s voicemail box was full. Emails went unanswered for weeks. When Sumrall finally got a response, she was essentially told it was the employers’ fault – not the state’s. It was a contentious phone call.

“Our modernized system has different reporting requirements than our old system, including more detailed wage reports,” a spokesperson for Colorado’s labor department said in an emailed statement to CPR. “It isn’t that the system isn’t working properly, it’s that it’s missing the more detailed data that was not provided by employers … in prior quarters.”

The spokesperson added that the department put a number of direct response channels in place since launching the new system, including a help form.

“[Third-party administrators]payroll companies and their clients are encouraged to contact us for support by using the “Contact Us” feature directly in MyUI Employer+ or by calling (303) 318-9100,” the spokesperson said.

Petteys is telling clients not to pay anything.

“We need a solution within Colorado unemployment to fix the problem and to remove any of the premiums owed and the penalties and interest because they do not owe those,” she said. “It’s very upsetting for [businesses] to get these notices .… Maybe you have somebody that has a state contract. And they’re very worried that something in the state contract’s going to get held up .… Clients are pretty upset that they continue to receive these notices.”

The data on wages isn’t the only error that’s cropped up with the new computer system. Colorado’s labor department is also struggling with incomplete data on how many jobs are being created. In March, the U.S. Bureau of Labor Statistics noted that starting late last year, Colorado’s employment numbers were unreliable.

Kinks aren’t uncommon when new information technology systems are rolled out. They’re complicated and cumbersome projects that can take years to implement and cost tens of millions of dollars.

But Colorado’s labor department has kept the problems under wraps, making it difficult for the various groups that rely on the system to understand what’s going on. For instance, the state didn’t tell journalists during a press call earlier this year that the information on employment being presented was pulled in part from incomplete statistics.

There’s no clear timeline for when the kinks are going to be worked out.

“As with any reporting requirement, the accuracy of wage reporting and required adjustments is an ongoing business process regardless of the system in place,” the labor department spokesperson said.

Payroll Vault’s Sumrall escalated the issue to Gov. Jared Polis’ office. A person from Polis’ office told her they are aware of the problems, but that the state labor department isn’t returning their calls, either. A spokesperson for Polis directed CPR to speak with the labor department when asked whether Polis was working on a solution.

“My feeling has been since I’ve been communicating with them is that they really want to keep this kind of quiet … They don’t want people to know what’s going on because it would be very upsetting,” Sumrall said.