If your small business has employees working in Idaho, you'll need to pay Idaho unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In Idaho, state UI tax is just one of several taxes that employers must pay. Other important employer taxes, not covered here, include federal UI tax, and state and federal withholding taxes.
Different states have different rules and rates for UI taxes. Here are the basic rules for Idaho's UI tax.
As an Idaho employer, you must register with the state. Registration provides information to several state agencies, including the State Tax Commission (STC) and, for UI tax purposes, the Idaho Department of Labor(DOL). You can register either online or on paper. Once registered, you'll be issued a state account number.
To register online, use the Idaho Business Registration System. To register on paper, use Form IBR-1, Idaho Business Registration Form. Blank forms are available for download from the STC website. There is no fee to register your business with IDES.
Note: To establish your Idaho UI tax account, you'll need a federal employer identification number (EIN). You can apply for an EIN at IRS.gov. Generally, if you apply online, you will receive your EIN immediately.
As an Idaho for-profit employer, you generally are liable for state UI taxes if you meet any of the following conditions:
These are essentially the same rules that apply for liability under the Federal Unemployment Tax Act (FUTA). Different rules, not covered here, apply to agricultural (farm) workers, domestic (in-home) workers, and employees of some (but not all) non-profit organizations.
One piece of good news is that state UI tax payments generally can be credited against your FUTA taxes.
UI tax is paid on each employee's wages up to a maximum annual amount. That amount, known as the taxable wage base, increases every year in Idaho, sometimes by more than $1,000. For current and historical information about wage bases and tax rates, check the Unemployment Tax Rate page of the DOL website.
The state UI tax rate for new employers, also known as the standard rate, also changes from one year to the next. In recent years, it has been decreasing, and generally has been between roughly 1.5% and 1.9%. Established employers are subject to a lower or higher rate than new employers depending on an "experience rating." This means, among other things, whether your business has ever had any employees who made claims for state unemployment benefits.
In Idaho, UI tax reports and payments are due the last day of the months of April, July, October and January for the quarter ended the preceding month. In other words:
If the last day of the month falls on a weekend or holiday, the due date is extended to the next business day.
You can file your reports and payments online or on paper. (You also have the option to file using magnetic media such as a CD; that option isn't covered here.) To file online, use the DOL's Employer Portal. You can make payments online by electronic check (free) or by credit or debit card (3% fee applies). You can also download a voucher and mail in a payment.
To file on paper, there is a two-part report form, comprised of Form TAX020, Unemployment Insurance Tax Report, and Form TAX026, Unemployment Insurance Wage Report. The DOL will mail you the two-part form at the end of each quarter. You can also download blank forms from DOL website.
You must file reports for the entire year if you are still in operation. As long as your UI account is active, you must file reports each quarter even if no wages were paid. If you cease operations or believe you should no longer file reports, contact your local Tax Representative. You will be subject to a penalty if you fail to file.
You are required to post a notice (poster) regarding state unemployment claims in a conspicuous place for all employees. The poster provides basic information on how to file a claim for unemployment benefits. You can download a set of all posters that Idaho requires employers to display, including the UI notice, from the Required Posters section of the DOL.
Employers who use independent contractors rather than hiring employees are not subject to the UI tax. However, it's important that you do not misclassify an employee as an independent contractor. If you do misclassify an employee, you could be subject to penalties or fines.
You may decide that it's easiest to hand over responsibility for payroll, including UI taxes, to an outside payroll service. If so, keep in mind that your business, or even you personally, may still be held directly responsible for mistakes made by an outside payroll company.
This article touches on only the most basic elements of Idaho UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and DOL websites for the latest information. The DOL also has a helpful publication, Handbook for Businesses: Idaho Unemployment Insurance Tax Information, that you can download from the DOL website. In addition to state UI tax, employers have other responsibilities not covered in this article such as federal UI tax, state and federal withholding taxes, required reporting of new hires, and required retention of employee records. You can get more information about other small business tax issues in other articles here on Nolo.