Employer's Guide to Unemployment Insurance Tax in Mississippi

Everything employers need to know about paying unemployment insurance taxes in Mississippi.

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

Register With the Department of Employment Security

As a Mississippi employer subject to UI tax, your small business must establish a Mississippi UI tax account with theMississippi Department of Employment Security (MDES). You can register for an account with MDES either online or on paper. In either case, you’ll be completing Form UI-1, Status Registration. Once registered, you’ll be issued a state UI account number. To register online, go to the Register section of the MDES website. To register on paper, download a Form UI-1 from the Downloadable Forms section of the MDES website. There is no fee to register your business with MDES.

Note: To establish your Mississippi 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

In Mississippi, most for-profit employers are liable for state UI taxes as soon as they either:

  • pay $1500 in wages in a single calendar quarter, or
  • have at least one worker (does not have to be the same worker) who performs services in some portion of a day in each of 20 different calendar weeks in a calendar year.

These are effectively the same rules that apply for liability for the federal unemployment tax under the Federal Unemployment Tax Act (FUTA). Different rules, not covered here, apply to domestic (in-home) workers, agricultural (farm) 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. In recent years, that amount, known as the taxable wage base, has been $14,000 in Mississippi. However, it’s always possible that amount could change.

The state UI tax rate for new employers also is subject to change from one year to the next. In recent years, it generally has been a little over 1% with .1% increases in an employer’s second and third years. 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.

File Scheduled UI Tax Reports and Payments

In Mississippi, UI wage reports and payments are due by the last day of the month following the close of each calendar quarter. In other words, reports and payments are due by the following dates:

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

If a report due date is a Saturday, Sunday, or a state or federal holiday, you may file and pay on the following workday.

You can file your reports and payments online or on paper. To file and pay online, go to the Employer Services section of the MDES website. You will have to create an online account before you can use the online reporting and payment system. You can pay online using an e-check or debit/credit card. To file on paper, use the combined Forms UI-2 and UI-3 (sometimes jointly called UI-2/3), which consists of Employer’s Quarterly Contribution Reportand Employer’s Quarterly Wage Report. You can download blank forms from the Downloadable Forms section of the MDES website.

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 states that the employer is registered with MDES, that employees are covered by UI, and explains who an employee can contact to file a UI claim. You can download a notice from the Required Posters section of the MDES website that meets the legal requirements.

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 Mississippi UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and MDES websites for the latest information. You also should consider downloading the MDES Employer Reference Guide. While not updated every year, the Guide nevertheless provides reasonably comprehensive information. 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, and required reporting of new hires. You can get more information about other small business tax issues in other articles here on Nolo.com.

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