How Do I Get Information on State Unemployment Taxes?
Each state has its own unemployment department that runs under federal guidelines. State unemployment rates and payment requirements differ in amount and how they are charged and paid. State unemployment taxes are paid to the state workforce office or state department of labor.
State Unemployment Taxes and Tax Rates
Most states base unemployment taxes on the federal tax requirements; a few states have different requirements for when unemployment taxes must be paid,
Employers must pay into both federal and state unemployment funds if they (1) pay wages to employees totaling $1500 or more in any quarter, or (2) have at least one employee during any day of the week during 20 weeks in a calendar year, regardless of whether or not the weeks were consecutive.
How to Register with Your State for Unemployment Taxes
When you hire your first employee, you must register with your state and begin calculating your unemployment tax rate and putting money aside from each payroll to pay unemployment taxes.
To find your state's unemployment tax department (different from the agency which pays unemployment benefits to workers) go to this Department of Labor page, click on your state, and look for the office of the department of labor, or workforce development (the office has different titles in different states).
Employee Deductions for Unemployment Taxes
A few states (currently Alaska, New Jersey, and Pennsylvania) require employers within the state to take unemployment tax deductions from employees. If you have a business presence in one or more of those states, check on this requirement.
Questions to Ask When Starting Out as An Employer for Unemployment Taxes
Some questions to ask if you are a new employer and want to comply with your state's unemployment tax program requirements:
- How do I apply?
- What is my company's rate? Is it different for new companies? How often is the rate determined?
- What are employees covered? Which employees are not covered?
- Must I file annual reports?
- How and when do I pay unemployment taxes? Can I file and pay online?
- What happens if a former employee files a claim?
State Unemployment Benefits for Independent Contractors
Most states do not include independent contractors in unemployment assistance programs, nor are employers required to pay unemployment taxes on these workers. Each state has its own rules to determine whether a worker is classified as eligible for unemployment insurance.. Check with your state to see if independent contractors can file claims and whether you must pay unemployment taxes for these workers.
Credit Reduction States
A state may borrow from the federal government to pay unemployment benefits (as of 2018, only the U.S. Virgin Islands). These states are called "credit reduction states." If an employer in one of these states pays wages subject to unemployment tax, the employer must pay additional federal unemployment tax when filing its tax report and payment form 940.
Some Examples of State Unemployment Tax Regulations
Tax-rated employers pay a percentage on the first $7,000 in wages paid to each employee in a calendar year. New employers pay 3.4 percent (.034) for a period of two to three years.
In Florida, the unemployment tax law is called the Reemployment Assistance Program. The state has an excellent booklet that provides a lot of information to employers about how to report and pay unemployment taxes in a variety of situations.
IRS. Employee Benefits, "Unemployment Insurance." Accessed Oct. 4, 2019.
U.S. Department of Labor. Unemployment Insurance Tax Topics. "Unemployment Insurance Taxes." Accessed Oct. 4, 2019.
Alaska Department of Labor and Workforce Development. "Alaska Unemployment Insurance Tax Handbook." Employee's Contribution, Page 9. Accessed Oct. 4, 2019.
New Jersey Department of Labor and Workforce Development. Employer Handbook. "Chapter 1, Section 4: Contribution Reports." Contribution Rates: Workers. Accessed Oct. 4, 2019.
Pennsylvania Dept. of Labor and Industry. Office of Unemployment Compensation. "Important information." Employee Contributions. Accessed Oct. 4, 2019.
IRS. "Fringe Benefits." Unemployment Insurance. Accessed Oct. 4, 2019.
U.S. Department of Labor. "Unemployment insurance Tax Topic." Misclassification of Workers. Accessed Oct. 4, 2019.
IRS. "2018 Instructions for Form 940." Page 1. Accessed Oct. 4, 2019.