State Unemployment Insurance Taxes: What Employers Should Know
All fifty states and D.C. impose unemployment insurance (UI) taxes on businesses. UI taxes can impose large costs on employers. But UI taxes are generally not as well understood as income, property, or sales taxes. UI taxes are levied on employers. They're based on wages paid to employees. State UI taxes, like federal UI taxes, are imposed on an employee's wage base. Some states, like California, follow the federal government's wage base of $7,000. That means that the UI tax rate will be imposed on the first $7,000 paid to an employee. But the wage base varies among the states. For example, Washington State has the highest wage base at $67,600. To that wage base is applied a tax rate. Because UI tax is really insurance, the rate will differ between employers based on the risk profile. Employers with more layoffs will tend to pay a higher rate. But each state will calculate the tax rate differently.
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