It’s more than a month into the new year, tax season is getting closer and the new payroll tax for Eugene workers is here and still raising eyebrows.
The city’s Community Safety Payroll Tax went into effect on Jan. 1, but businesses are still facing obstacles in getting the tax up and running. City staff say they are working to address the issues.
Accounting software needed to administer it is still not available, and the complexity of the tax makes it difficult to implement manually, putting a strain on business owners and payroll accountants during the pandemic.
Adopted in June 2019, the Community Safety Payroll Tax was designed to raise additional money to pay for police and other safety initiatives. The tax was unpopular among many community members who did not want to use their paychecks to fund more police in Eugene, and the Eugene City Council was criticized for passing the ordinance without putting it on the ballot and allowing voters to have a say.
Rachel McCoy is an accounting assistant with Schapiro CPA. She says she has encountered a number of issues with the city’s payroll tax in the last six weeks.
The main problem is the software used by employers and accountants to complete payroll, McCoy says. Many businesses use Intuit products, specifically the QuickBooks program. She explains there are a few options: A business can use the online or desktop version of QuickBooks, which allows for the manual creation of additional tax items. But, she says, the payroll tax isn’t simple to add in and is easy to mess up if you don’t understand it.
“Since the tax is difficult, it puts a lot of responsibility on the employer to make sure they are programming correctly,” McCoy says.
The online version is not helpful, either. McCoy says that as of early February, Intuit had not developed the software to compute Eugene’s unique tax. When the new software does become available, a basic subscription won’t cover it, meaning employers will have to pay to update their systems.
Another complication with the tax, McCoy explains, is its varying rates that depend on income. If your gross wages are within a certain bracket, you pay one rate, but if you make more than usual during a pay period due to more hours or bonuses, you may have to move to a higher tax bracket. Manually adjusting the tax each pay period creates more work for business owners, she says.
“If you have somebody who makes $15 an hour, but they vary between 30 and 35 hours a week, some weeks they might be subject and other weeks they were not subject. Each pay period you have to calculate gross wages and then tax on that,” she says.
Adam Morrison, the senior payroll tax analyst for the city of Eugene, says he knows that the QuickBooks software isn’t up to date. Morrison is working directly with QuickBooks, he says, and they will support the tax, though they are running behind due to “programming bugs.” Eugene is not the only city facing tax software delays, he adds.
“Unfortunately we do not have any additional information,” Morrison says. “That is between QuickBooks.” He says people can call or email the city’s helpline to receive help from the city.
Once people get the hang of the tax, he explains, it should become smoother. For the next two financial quarters, Morrison says the city has waived the late filing and pay penalty.
“We were aware of COVID, and were aware this would have an effect on employers out there. As well we knew this was a new tax and has complexities to it that are not similar to other taxes,” Morrison says.
Some local business owners are still frustrated by the delay. Mark Kosmicki, the owner of Party Downtown, a restaurant and bar in Eugene, says the city should have ensured that major bookkeeping companies would have the software to support the tax.
And once the QuickBooks software does support the payroll tax, Kosmicki says, the employees will “take a hit” because he will need to retroactively take out the tax.
Even when the updated software becomes available for Kosmicki, he says the fluctuating rate schedule adds another frustrating variable.
“If you make a certain amount of money you pay one rate, and then if you make a different amount of money, it changes. It’s not something that’s an easy equation you can do yourselves,” he explains. “It’s a lot more work.”
Kosmicki says the city should have put off implementing the tax and that it was shortsighted to tax people and businesses who may be struggling due to the pandemic. “Plus,” he says, “we don’t need more police. I’m sure no one is looking forward to having more money taken out of their checks for police.”
For questions regarding the Community Safety Payroll Tax email CSPayrollTaxHelp@Eugene-or.gov or call 541-682-5053.