A Little Good News From Arizona

by Doreen Lobock, RPR, CSR, and Michele Balmer, RPR

Arizona firm owners have been faced with the possibility of being liable for state employment and wage taxes.  The Arizona Department of Economic Security in early 2007 performed a number of tax audits on certain firms and with regard to one firm in particular, determined that the services performed by individuals as court reporters constitutes employment and renders the firm a “temporary services employer,” and therefore, the amount paid to the reporters was subject to employment and/or wage taxes.  The finding was troubling because it would have set a precedent for all Arizona firm owners going forward, and could have resulted in serious financial consequences.

A similar audit and determination was performed back in the ‘70s and resulted in an Arizona Supreme Court decision that found the reporters in that case were independent contractors and did not have employer-employee relationships with the firms, and that the firms should not be required to pay unemployment tax to DES.

The tax attorney who assisted in the prior matter, Stephen E. Silver of Silver Lockwood, PLC, was retained by the firm owner and ACRA in 2007 and was able to help out once again by writing an appeal letter.  Since the filing of the appeal letter in October of 2007, the case has been “pending” a DES review and there was nothing to do but anxiously await their response.

The Arizona Court Reporters Association is pleased to announce that DES recently notified the firm owner and reported that they were reversing their prior decision that the owner was liable for state unemployment taxes based on the appeal letter by Mr. Silver.

This is a substantial victory for the freelance court reporting industry in Arizona, due to the fact that the firm that had been audited would have been liable for taxes and penalties encompassing some years before the audit, as well as the years going forward and could have resulted in thousands of dollars due and owing. 

This outcome was truly a collaborative effort of the firm owner, ACRA, and Mr. Silver, and Arizona firm owners can breathe a little easier from this good news!