Navigating Unemployment Tax Challenges: Our Experience as New Restaurant Owners

In July 2023, my spouse and I embarked on an exciting yet daunting journey by purchasing a restaurant in Oregon. Investing our life savings, we aimed to create a small business that would serve as a pillar in our community, offering more than just culinary delights but also a sense of belonging and support.

Upon taking over, we discovered that the previous owner had terminated all the restaurant staff. Despite being newcomers to the industry, we made a decision driven by a sense of responsibility and compassion — to rehire the original team. Many of these individuals had families relying on them, and they possessed the expertise to keep the restaurant running smoothly. This decision, albeit noble, has unexpectedly led us into a tricky situation.

A few months into operation, we were surprised to learn that we’re facing substantial back unemployment taxes resulting from our choice to reinstate the prior employees. An official from the employment department informed us that had we opted to assemble an entirely new team, our business, categorized as new, would likely have benefited from a reduced tax rate. Instead, by bringing back the original staff, we’re now subjected to the existing tax rate and owe nearly $10,000 in back taxes.

In a conversation with a compliance specialist, it was conveyed that an appeal might not yield much relief, though they clarified their lack of legal expertise. The situation was presented as though we had little recourse, leaving us feeling cornered.

For a small business like ours, this financial burden is significant. To date, we haven’t drawn salaries; instead, we’re sustaining the business and our dedicated staff by dipping into personal savings. This unforeseen expense feels like a penalty for making a conscientious choice to support our community and employees.

We’re not seeking charity, just equity. It’s disheartening to see how the system appears to chastise small business owners for prioritizing job retention. Such hurdles perhaps explain why many small enterprises struggle to thrive or even survive.

To our fellow entrepreneurs, have any of you encountered a similar predicament? Have you pursued an appeal, consulted with legislators, or engaged in other avenues of recourse? We’d deeply appreciate your insights, guidance, or even just an acknowledgment that our sense of injustice isn’t misplaced.

Summary: As new restaurant owners in Oregon, we rehired the previous staff to keep them employed, only to face significant back taxes due to the tax rate attached to these rehired roles. We feel unjustly burden