Employer Tax FAQs

What is Unemployment Insurance Tax?

What is Unemployment Insurance Tax?

Unemployment insurance (UI) tax is a tax on employer payrolls paid by employers from which unemployment benefits are paid to qualified unemployed workers. Unemployment tax is not deducted from employee wages. Unemployment tax payments made by employers are transferred to the Unemployment Insurance Trust Fund in Washington, D.C. Each year a prorated share of the interest earned on this trust fund is added back to the account of each North Carolina employer having a credit experience rating balance.

Who is liable for Unemployment Tax?

Who is liable for Unemployment Tax?

  1. A general business employer with gross payroll of at least $1,500 in any calendar quarter or with at least one worker in 20 different weeks during a calendar year.
  2. An employer who acquires all or any portion of a liable business in North Carolina.
  3. An employer who voluntarily elects to become liable regardless of not meeting the required criteria.
  4. An employer subject to the Federal Unemployment Tax Act, 26 U.S.C. § 3301 et seq.
  5. A 501(c)(3) non-profit organization with at least four workers in 20 different calendar weeks during a calendar year.
  6. An employer with agricultural labor of 10 or more workers on any day during 20 different calendar weeks in a calendar year, or with $20,000 or more in gross payroll for any calendar quarter.
  7. An employer with domestic employment in a private home, college club, fraternity or sorority with a gross payroll of at least $1,000 in any calendar quarter.
  8. A state or local government agency or department.
  9. An employment service company that contract to supply individuals to perform employment services for clients or customers.
  10. Any Indian Tribe as defined in FUTA.
How do I apply for a North Carolina unemployment tax number?

How do I apply for a North Carolina unemployment tax number?

The Employment Security Law of North Carolina requires each employer to submit true and accurate information for determining liability by completing an Employer Status Report (Form NCUI 604) for a determination of liable status. You can apply for an UI Tax Account Number online and receive a quick determination. Or, you can download Form NCUI 604 to print, fill out, and mail to DES. Employers will receive a PIN number in the mail after an account number has been assigned. You can use the PIN to conduct business online with DES and monitor your account. 

Each employer is also required to notify DES when changes in status occur such as changes in ownership, changes of address, when the business closes or ceases to operate, or when a closed or inactive business begins to operate again. You can fill out a Change in Status Report (Form NCUI 101-A ) online or, if you prefer, you can download Form NCUI 101-A to print, fill out, and mail to DES.

If you have further questions regarding liability under the Employment Security Law, please email des.tax.customerservice@nccommerce.com or call 919-707-1150.

Year

Standard Beginning Tax Rate

Taxable Wage Base

2015

1.200% (.01200) 

$21,700

2016

1.000% (.01000) 

$22,300

2017

1.000% (.01000) 

$23,100

2018

1.000% (.01000) 

$23,500

2019

1.000% (.01000) 

$24,300

2020

1.000% (0.1000)

$25,200

For an employer’s contribution rate to be reduced below the standard rate for any calendar year, its account must be subject to being charged with benefits for at least 12 calendar months ending July 31 or its liability must extend over a period of all or part of two consecutive calendar years.

Employers receive credit for tax payments posted to their account. These credits are used to determine the base rate from which the tax rates for all contributory North Carolina employers are assigned on an annual basis. August 1 is the computation date for employer contribution rates.

What are experience rating accounts?

What are experience rating accounts?

North Carolina’s UI tax rates are determined under an experience rating system. Once an employer is eligible to receive a reduced tax rate, the tax rate is determined annually based on experience. Experience rating is affected by payroll, tax paid, timeliness of payments and UI benefits charged against the employer’s account. Based on economic conditions, an employer’s tax rate could be as low as 0.060% or as high as 5.760%.

Each employer's payroll for the last three (3) fiscal years as of July 31 of the current year is divided into the applicable credit or debit balance to yield a ratio. This ratio is multiplied by sixty-eight hundredths (0.68) to yield the Employer's Reserve Ratio Percentage (ERRP). Refer to the rate formulas below for information to calculate the UI tax rate, which does not include the 20% surtax for the Unemployment Insurance Reserve Fund.

UI Trust Fund Balance as Percentage of Total Insured Wages

Contribution Rate

Less than or equal to 1%

2.9% minus ERRP

Greater than 1% but less than or equal to 1.25%

2.4% minus ERRP

Greater than 1.25%

1.9% minus ERRP

In November of each year, active employers will be mailed an Unemployment Tax Rate Assignment (Form NCUI 104), which shows the calculation of the tax rate for the succeeding calendar year. Experience rating accounts are maintained for rating purposes only. This statement requires no payment, nor can it be used to pay tax due. The tax rate shown on the Unemployment Tax Rate Assignment (Form NCUI 104) becomes final unless protested in writing prior to May 1 of the following year. 

Employers may make a voluntary contribution to reduce the tax rate. Voluntary contributions must be made within 30 days following the date that the Unemployment Tax Rate Assignment (Form NCUI 104) was mailed.

Log in to your account to view your tax rate and benefit charge information and to calculate a voluntary contribution.

Voluntary contributions can be made online or by check. Checks must be identified as voluntary contributions payable to the Division of Employment Security and mailed to: 

Division of Employment Security 
Post Office Box 26504 
Raleigh, NC 27611-6504
If timely voluntary contributions are made, will another Unemployment Tax Rate Assignment (Form NCUI 104) be sent?

If timely voluntary contributions are made, will another Unemployment Tax Rate Assignment (Form NCUI 104) be sent?

No. A written notice will provide you with confirmation of your new tax rate, but you will not receive another detailed summary of your account. However, the summary you receive the following year will reflect the voluntary contributions you made.

Are all employers treated the same with regard to tax rate assignment?

Are all employers treated the same with regard to tax rate assignment?

Tax rates are assigned to all subject employers using the same experience rating formula. The base rate in effect for a given year is determined by the solvency of the Unemployment Insurance Trust Fund as shown above.

How can the rate increase, even if there are no benefit charges?

How can the rate increase, even if there are no benefit charges?

The tax rate is affected by payroll, tax paid, timeliness of payments and UI benefits charged against the employer’s account, and the base rate in effect for the tax year. These are all factors that can potentially cause an increase in your assigned rate.

When is a twenty percent (20%) surtax for the Unemployment Insurance Reserve Fund being imposed?

When is a twenty percent (20%) surtax for the Unemployment Insurance Reserve Fund being imposed?

A 20% surtax is imposed upon contributions in a calendar year when the amount in the Unemployment Insurance Trust Fund does not equal or exceed one billion ($1,000,000,000) in accordance with G.S. §96-9.7(b).

How will this affect my tax rate?

How will this affect my tax rate?

Your rate will increase by approximately 20% if the Trust Fund does not equal or exceed one billion ($1,000,000,000). The rate you are assigned will be the combined or composite rate.

Is this surcharge FUTA certified?

Is this surcharge FUTA certified?

The surtax for the Unemployment Insurance Reserve Fund is not FUTA certified; when the surtax is imposed DES will only certify .8333 (83.33%) of the total taxes paid. If the surtax is not imposed DES will certify 100.00% of the total taxes paid.

Will all employers be affected?

Will all employers be affected?

The surtax for the Unemployment Insurance Reserve Fund applies to all employers who are paying UI contributions based upon payroll.

Can the tax rate be protested?

Can the tax rate be protested?

Written protests must be postmarked between the date the statement is mailed and May 1st of the year to which the tax rate applies. A valid protest must be signed by an owner, partner, or corporate officer, not a third party. An example of a valid protest is one in which an error has been found in the figures used to calculate the tax rate. 

What records must an employer keep for unemployment insurance tax purposes?

What records must an employer keep for unemployment insurance tax purposes?

All employers must maintain records for each person they employ (including corporate officers). These records must show: 

  1. The employee's name and social security number.
  2. The beginning and ending dates worked.
  3. The amount of wages paid.
  4. All other payments made to the employee including vacation pay, tips and the reasonable value of board and lodging or other remuneration for services.

Records must be maintained for at least five (5) years and be available for inspection by authorized personnel of DES.

How are wages reported and taxes paid?

How are wages reported and taxes paid?

The Employer's Quarterly Tax and Wage Report (Form NCUI 101) is used to report wage and tax information. Liable employers will need to file the report online, download a blank Employer's Quarterly Tax and Wage Report (Form NCUI 101) from our website, or contact the Employer Call Center at 919-707-1150 to request that a blank form be mailed to them. The Employer's Quarterly Tax and Wage Report (Form NCUI 101) data can also be submitted on magnetic media.

Employers are required to file a report for each quarter, beginning with the quarter in which employment begins. Tax must be paid on each employee's wages up to the taxable wage base for each calendar year. Quarterly wages must be reported for each employee by name and social security number. Correct and complete social security numbers are required to properly record wages.

Both tax and reported wages are due by the last day of the month following the end of each quarter. NOTE: Failure to receive a report form from DES does not relieve employers of the responsibility to file. If the form is lost or damaged or if additional forms are needed, contact the Employer Call Center at 919-707-1150.

Quarter

Reporting Period

Due Date

First

January 1 through March 31

April 30

Second

April 1 through June 30

July 31

Third

July 1 through September 30

October 31

Fourth

October 1 through December 31

January 31

A report must be submitted even if the employer has no employees for a quarter. If employment has ended and is not expected to begin again in the near future, a request for inactive status should be made on the Change in Status Report (Form NCUI 101-A). This form can be filed online or can be downloaded.

Tax payments can be made online via e-check and credit card. DES also accepts ACH credit payments initiated through your financial institution. For more information about ACH credit payments, contact the Employer Call Center at 919-707-1150. If the amount of tax due is less than $5.00, no payment is required but a report must be submitted.

If the tax report is filed online or on magnetic media and payment is made by paper check, download and print a Payment Voucher form to submit with the check. NOTE: To avoid duplication, do not mail the payment with a copy of the electronically filed return.

If a paper return is filed and payment is made by paper check or money order, the payment should be sent with the report to ensure proper credit.

Tax and wage information may be filed in a variety of file layouts on CD or by file upload to our website. CD or file upload is required for any employer or business reporting for one or more employers, who reports a total of 10 or more wage items per quarter. The failure of an employer or agent to comply with this requirement will result in a penalty or denial of the right to report wages and file reports for the employer for a period of one year pursuant to G.S. §96-9.15(d) . It is important to timely file reports and make tax payments to ensure that:

  1. you receive the maximum state unemployment tax credit against FUTA
  2. you receive credit on your experience-rating account
  3. you avoid penalty and interest charges

The postmark date determines timeliness. Metered mail is not proof of timeliness.

Failure to timely file quarterly reports or make payments (when due) will result in penalty charges for late filing and/or late payment, and/or interest on the amount of tax due. The late filing penalty is 5% of the amount of tax due per month, or portion thereof, to a maximum of 25%. The late payment penalty is 10% of the amount of tax due. Interest is charged at the rate set forth in G.S. §105-241.1(i) and is subject to change semi-annually.

Use the table below to calculate the interest due on delinquent unemployment insurance taxes. Determine the interest rate applicable to the delinquent period(s). Multiply the amount of tax due by the interest rate for each month, or portion thereof, from the due date to the date paid.

Interest Rates for Delinquent Taxes

Year

Period

Interest Rate

2015

January 1 thru December 31 

.42% (.0042)

2016

January 1 thru December 31 

.42% (.0042)

2017

January 1 thru December 31 

.42% (.0042)

2018

January 1 thru December 31 

.42% (.0042)

2019

January 1 thru June 30 

.50% (.0050)

2019

2020

July 1 thru December 31

January 1 thru June 30 

.42% (.0042)

.42% (.0042)

 

How are SUTA tax payments reported to the Internal Revenue Service?

How are SUTA tax payments reported to the Internal Revenue Service?

Each year, DES certifies the tax rate, amount of taxable wages, and amount of tax paid by each employer in the prior calendar year to the Internal Revenue Service (IRS). This data is matched with the data reported by the employer on the Employer’s Federal Unemployment (FUTA) Tax Return (IRS Form 940) filed with the Internal Revenue Service.

NOTE: Only 83.33% of the tax paid for any year in which the surtax for the Unemployment Insurance Reserve Fund is in effect will be certified. Also, the tax rate certified will be the UI tax rate and not the composite tax rate. If the surtax is not imposed DES will certify 100.00% of the total taxes paid.

If a discrepancy is found, the IRS will notify the employer by letter. The employer must resolve the discrepancy by correcting IRS Form 940 or obtaining a corrected certification from the State if the State credits are found to be incorrect.

A request for re-certification may be made online. The online FUTA recertification page may be printed and attached to the IRS letter of assessment. Re-certification may also be requested by mail, telephone or fax. Any request must include the Federal Employer Identification Number (EIN), the State employer account number, and the period to be re-certified. Requests should be addressed to: 

Employer Accounts Adjustment Unit 
Division of Employment Security 
Post Office Box 26504 
Raleigh, NC 27611-6504 
Telephone: 919-707-1462 
Facsimile: 919-733-1255 

An Employer Account Abstract (Form 940-C) will be mailed to the employer's address of record. This form contains the re-certification information requested. A copy of the form should be attached to the letter of assessment and returned to the IRS.

How do I make corrections to previously filed tax reports?

How do I make corrections to previously filed tax reports?

If an employer finds that an error was made in a quarterly report after the report has been filed, an adjustment can be made online or on the Adjustment to Employer Quarterly Report (Form NCUI-685).

If corrections are not filed online, the Adjustment to Employer Quarterly Report (Form NCUI 685) and the instructions for completing the form are available for download. A separate form must be completed for each quarter to be corrected. Completed Adjustment to Employer Quarterly Report (Form NCUI-685) should be addressed to: 

Employer Accounts Adjustment Unit 
Division of Employment Security 
Post Office Box 26504 
Raleigh, NC 27611-6504 
Telephone: 919-707-1462 
Facsimile: 919-733-1255
What are excess wages and how are they calculated?

What are excess wages and how are they calculated?

Item 3 (LESS: EXCESS WAGES) on the Employer's Quarterly Tax and Wage Report instructs employers to enter the amount of wages paid during the quarter that is in excess of the applicable North Carolina taxable wage base.

NOTE: If you file your return online, the excess wages will automatically be calculated for you.

Example (for illustration purposes only): An employer reports one employee who earns $6,000 per quarter. The taxable wage base for the illustrated year is $20,400.

 

1st

2nd

3rd

4th

Wages Paid Subject to the Law

6000

6000

6000

6000

- Excess Wages

0

0

0

3600

= Wages Subject to Tax

6000

6000

6000

2400

Excess wages are verified annually by an automated Excess Wage Audit System. If a discrepancy is found, the employer is notified of the probable cause of the discrepancy (if the cause can be determined) and billed if additional tax is due. If excess wages were underreported, a refund will be issued if the amount to be refunded is $5.00 or more.

How to calculate Excess Wage Information for Multi-State Employers?

How to calculate Excess Wage Information for Multi-State Employers?

Employers are allowed to use wages reported to other states for employees also reported to North Carolina in the computation of excess wages. Using only the North Carolina wages, the employer's excess wages may appear incorrect. In these situations, the employer is asked to supply DES with proof that tax has been paid on the correct wages in another state(s).

When wages are paid in another state(s), excess wages are computed by quarter using wages paid in the other state(s) during the quarter before using wages paid in North Carolina to meet the taxable wage base. Only wages paid up to the taxable wage base in each state can be used to meet the taxable wage base in North Carolina.

Below are examples depicting the computation of excess wages for a single employee earning wages in multiple states.

Example 1

State

Wage Base

Quarter 1 Total

Quarter 1 Taxable

Quarter 2 Total

Quarter 2 Taxable

Quarter 3 Total

Quarter 3 Taxable

Quarter 4 Total

Quarter 4 Taxable

SC

7000

1000

1000

1000

0

1000

0

1000

0

VA

8000

1000

1000

1000

0

1000

0

1000

0

GA

8500

1000

1000

1000

500

1000

0

1000

0

NC

13200

5000

5000

5000

4700

5000

0

5000

0

 

Example 2

State

Wage Base

Quarter 1 Total

Quarter 1 Taxable

Quarter 2 Total

Quarter 2 Taxable

Quarter 3 Total

Quarter 3 Taxable

Quarter 4 Total

Quarter 4 Taxable

VA

8000

5000

5000

5000

0

5000

0

5000

0

NC

13200

5000

5000

5000

3200

5000

0

5000

0

 

Example 3

State

Wage Base

Quarter 1 Total

Quarter 1 Taxable

Quarter 2 Total

Quarter 2 Taxable

Quarter 3 Total

Quarter 3 Taxable

Quarter 4 Total

Quarter 4 Taxable

NJ

17200

5000

5000

5000

5000

5000

0

5000

0

NC

13200

5000

5000

5000

0

5000

0

5000

0

 

What DES Services are available to Payroll Providers

What DES Services are available to Payroll Providers

These services are only supplied to agents who have a power-of-attorney on file with DES for each employer for which data is requested. Transactions involving a power-of-attorney must comply with Gen. Stat. ch. 32A.