IRS & Tax Authority Representation
Defending a Small Business Against an Unfair Payroll Tax Increase
Strategic representation before the Illinois Department of Employment Security helped a small business overturn an improper unemployment insurance tax rate increase following COVID-19 closures.
overview
Following state-mandated closures during the COVID-19 pandemic, a small business was forced to lay off employees in compliance with Illinois executive orders. Despite these extraordinary circumstances, the Illinois Department of Employment Security (IDES) later reclassified the layoffs as standard separations.
This reclassification triggered a significant increase in the company’s unemployment insurance tax rate, creating unexpected payroll tax exposure at a time when the business was still rebuilding operations and staffing.
Challenge
IDES’s determination treated government-mandated layoffs as employer-initiated decisions, ignoring the legal and factual context of the pandemic shutdown.
If left unchallenged, the higher unemployment insurance tax rate would have:
Increased ongoing payroll tax costs
Restricted the company’s ability to rehire staff
Undermined post-pandemic financial stability
The business needed a defensible, procedural appeal grounded in agency rules—not general hardship arguments.
Solution
We identified that IDES’s classification conflicted with both the factual record and applicable state guidance governing COVID-related employment separations.
Our approach focused on building a precise administrative record by:
Documenting the mandatory nature of the shutdown
Citing relevant executive orders
Linking unemployment claims directly to state-mandated closure
Aligning arguments with IDES’s appeal standards
We submitted a comprehensive appeal package including affidavits, separation records, and closure documentation demonstrating that the layoffs were not employer-driven decisions and should not trigger increased unemployment tax liability.
Result
IDES reversed its initial determination, reclassifying the layoffs appropriately and reducing the company’s unemployment insurance tax rate.
The successful appeal:
Saved the business over $9,000 in payroll taxes
Restored financial predictability during recovery
Established a defensible precedent for future reviews
Following resolution, we implemented an internal documentation review process to ensure future employee separations—especially those outside the employer’s control—are properly classified and protected against similar rate increases.
