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Still Time in Several States to Lower Unemployment Tax Rate

Feb 17, 2017 10:01:07 AM

Many employers have already received their 2017 state unemployment tax rate notices. Some are not happy with the tax rate that they will be paying or are concerned that their unemployment tax rate will rise because the amount of wages subject to unemployment tax (taxable wage base) has increased. Employers who are unhappy with their 2017 state unemployment tax rate should consider making a voluntary contribution to lower that rate if it is permitted in the state where they do business. There are several states that permit voluntary unemployment tax contributions, as long as the contribution is made by the state deadline (which varies by state). Some of the states that still permit voluntary contributions to lower an employer’s 2017 unemployment tax rates are listed below along with the deadline for making the payment:

  • Arkansas — March 31.
  • Colorado — March 15.
  • Massachusetts — 30 days after the rate notice mailing (sent by end of January).
  • Michigan — no later than April 30.
  • Minnesota — April 30 (must be made electronically).
  • New York — March 31.
  • North Dakota — April 30.
  • Texas — 60 days after the rate notice mailing (sent in December).
  • Washington — February 15.

All states require a minimum experience rating period before a new employer can make a voluntary contribution. Some states exclude certain groups of employers from making voluntary contributions (e.g.,employers with a negative reserve balance, employers with outstanding state unemployment tax liabilities, and employers that have a portion of their negative reserve balance written off). Check with the appropriate taxing authority to determine the specific restrictions that apply.

A voluntary unemployment tax payment could be particularly valuable in cutting down the effects of one year of particularly bad unemployment benefit experience; however, it is not always advantageous to make a voluntary contribution. Employers should consider whether their taxable wages are relatively constant from year to year. An employer will not save money in the long run by paying a lower unemployment tax when taxable wages are lower, and then paying a higher tax rate when taxable wages increase.

Some states (e.g., Arizona, Arkansas, Indiana, and Washington) compute the voluntary contribution amount and include it on the rate notice. Other states, such as New York, require the employer to calculate the voluntary contribution amount, assess the profitability, and make the payment before the rate notice is received. Some states, like Massachusetts and Minnesota, have an online calculator to help employers determine whether a voluntary contribution is worthwhile. Voluntary contributions are generally nonrefundable, so it should not be paid unless it will benefit the employer.

2017 Thomson Reuters

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