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Controlling Unemployment Insurance Tax Costs


Understand your unemployment tax rate computation

Your overall tax rate is calculated as follows:

Benefit Costs
Total Taxable Wages
X Reserve
+ Social
= Overall
Tax Rate

TIP: Make every effort to keep Benefit Costs to a minimum.


  • Screen applicants to be sure they are properly suited for the work.
  • Have clear written statements of policy and rules concerning employee conduct at work.
  • Monitor new employees' progress carefully.
  • Keep accurate records of attendance, tardiness, and all warnings given.
  • Do not condone violations of rules. Be consistent in disciplinary actions.
  • Conduct exit interviews and document the reason for separation.


  • Be specific in providing separation explanations to this Department.
  • Carefully read and reply timely to all notices concerning benefit claims and requests for information.
  • Report vacation, separation, retirement, or pension payments.
  • Mail all appeals within the period provided by law.
  • Attend all appeal hearings and present factual information and evidence.
  • Offer job openings to laid-off employees or contact other employers to help find work for them.


Employer's Unemployment Tax Reports which are not filed timely are subject to a late filing penalty:

Late 0 - 15 days 5% of the tax due

16 - 30 days 10%

31 - 45 days 15%

46 - 60 days 20%

Over 60 days 25%

There is a minimum penalty of $25.00

TIP: Make every effort to pay the taxes when they are due. If you do not have the money, file the report timely without payment and include a proposed payment schedule. You will not be assessed the filing penalty if the report is received timely.



Unemployment taxes which are not paid timely are assessed interest at the rate of 1% per month. If payment or satisfactory payment arrangements are not made after the first billing notice is received, an additional payment penalty of 5% is assessed. There is also a 1% surcharge added to your unemployment tax rate if any taxes are owing for the past fiscal year, July 1 through June 30.

TIP: Make every effort to pay your unemployment taxes when they are due. If you cannot do so, promptly contact our Department and make payment arrangements. You will still be charged interest on the unpaid balance, but you will not be charged the payment penalty and we generally will not file a lien if payment arrangements are current.


Your quarterly employee wage lists must be filed online. Failure to do so may result in the assessment of a $50.00 wage list penalty.


You receive a 5.4% credit against your Federal unemployment tax of 6.2% if you pay all your state taxes by January 31. Payments made after that date only receive 90% of the credit. We are required by law to provide the IRS with a tape of all employer payments. They compare your Federal 940 Unemployment Tax Report against that tape. If payments are not shown as timely, the IRS generates an additional assessment, plus interest and penalty.

TIP: Review your state reports before preparing your Federal 940 report to make certain all state taxes were paid by January 31.


Individuals may be classified as independent contractors and excluded from unemployment tax coverage if they meet two criteria:

1. The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the contract of hire for services.


2. The individual has been and will continue to be free from your control or direction.

TIP: Make certain that workers not on your payroll are independently established in their own business. A simple test is to ask one question: "what will their status be when they are finished working for you?" If the answer is unemployed, that's a good indication that they are not independently established.

If you have any unemployment benefit or tax questions, please call 801-526-9235 or toll-free 1-800-222-2857, or visit