Employer's Guide to Unemployment Insurance Tax in Louisiana

If your small business has employees working in Louisiana, you'll need to pay Louisiana unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In Louisiana, 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 Louisiana's UI tax.

Register With the Louisiana Workforce Commission

As a Louisiana employer, your small business must register with the Louisiana Workforce Commission (LWC). When you register, LWC will determine if you are liable for UI taxes. Most employers are liable. If you are liable, LWC will issue you a Louisiana unemployment state identification number (SID, also known as an employer account number or EAN).

You must register online; there is no longer an option to register on paper. To register, use the online Louisiana Unemployment Tax Account Application at the laworks.net website.

Note: To establish your Louisiana 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.

Rules for UI Tax Liability

As a Louisiana for-profit employer, you generally are liable for state UI taxes if you meet any of the following conditions:

• you pay wages of $1,500 or more during any quarter in a calendar year
• you employed at least one individual during some portion of a day during 20 or more separate calendar weeks in a calendar year
• you acquire all or part of another business, or the assets of another business, which at the time was an employer subject to the law governing state UI taxes (the Louisiana Employment Security Law), or
• you are liable for federal UI taxes under the Federal Unemployment Tax Act (FUTA) and have at least one employee in Louisiana.

The first three listed items are essentially the same rules that apply for liability under FUTA. Therefore, if you're liable for federal UI taxes, you're likely also liable for Louisiana UI taxes, and vice versa. 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.

Wage Base and Tax Rates

UI tax is paid on each employee's wages up to a maximum annual amount. That amount, known as the taxable wage base, has been stable at $7,700 in Louisiana for many years. However, it's always possible the amount could change.

The state UI tax rate for new employers is subject to change from one year to the next. As a new employer, your Louisiana UI tax rate will depend on what kind of business you're in—or, more technically, what "industry" you're in. The details are complicated. However, in simple terms:

• industry categories are based on the North American Industry Classification System (NAICS), and
• the state will calculate your rate based on the NAICS average UI tax rate for your industry.

The NAICS was created by the federal government to classify and analyze statistics for different kinds of businesses. Louisiana, however, uses the average tax rate for each of these kinds of businesses to assign a UI tax rate to new employers. The new employer rate generally is in effect for one year.

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.

For the most current wage base and tax rate information, check the LWC website.

File Quarterly UI Tax Reports and Payments

In Louisiana, UI tax reports and payments are due no later than the last day of the month immediately following the end of each quarter. In other words:

• 1st Quarter reports and payments due on or before April 30
• 2nd Quarter reports and payments due on or before July 31
• 3rd Quarter reports and payments due on or before October 31, and
• 4th Quarter reports and payments due on or before January 31.

You must file your reports online. Use LWC's Wage Reporting System. You'll need to create an account with a user ID and password the first time you use the system. You also can make payments online, using the Louisiana Wage and Tax System (LAWATS). You can pay online using Electronic Funds Transfer (EFT). You can also use the online system to print out a payment voucher and mail in a check.

You must file quarterly reports even if no contributions are due. You will be subject to a penalty if you fail to file. Late payments are subject to interest and penalty charges.

Post a Notice (Poster)

You are required to post a notice (poster) regarding state unemployment claims in a conspicuous place for all employees. The poster provides information to employees on when they may be eligible to receive unemployment benefits, when they may be disqualified from benefits, penalties for false statements, and how to file a new unemployment claim. You can download a notice that meets all legal requirements from the Downloads section of the LWC website.

Do Not Misclassify Employees as Independent Contractors

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.

Using Payroll Service Companies

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.

Additional Information

This article touches on only the most basic elements of Louisiana UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and LWC websites for the latest information. LWC also has a helpful publication,Unemployment Insurance Tax Guide for Employers, that you can download from the LWC 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 on Nolo.com.