If your small business has employees working in Missouri, you’ll need to pay Missouri unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In Missouri, 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 Missouri’s UI tax.
As a Missouri employer subject to UI tax, your small business must establish a Missouri UI tax account with the Missouri Division of Employment Security (DES), which part of the Missouri Department of Labor (DOL). You must register for a UI tax account within 30 days of becoming liable for employer taxes. You can register for an account with DES either online or on paper. Once registered, you’ll be issued a UI account number.
To register online, use Missouri’s Online Business Registration (OBR) portal. To register on paper, use Form MODES-2699-5, Unemployment Tax Registration. Blank forms are available for download from the Publications and Forms section of the DOL website. There is no fee to register your business with DES.
Note: To establish your Missouri 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.
In Missouri, a for-profit employer usually becomes liable for state UI taxes when it meets any of the following four criteria:
The first two criteria are essentially the same as those that apply for liability for the federal unemployment tax under FUTA. Therefore, in most cases, if you are liable under FUTA you’ll also be liable for Missouri UI tax, and vice versa. Different rules, not covered here, apply to agricultural (farm) workers, domestic (in-home) workers, and some (but not all) non-profit organizations.
Once your business becomes liable for Missouri UI tax, it continues to be liable until its liability is terminated. 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. In Missouri in recent years, that amount, known as the taxable wage base, has been $13,000. Under Missouri law, that amount—$13,000—is the maximum allowed taxable wage base, and $7,000 is the allowed minimum, but the amount can be changed by either $1,000 or $500 for any new year.
The state UI tax rate for new employers, also sometimes called the standard beginning tax rate, also can change from one year to the next. In recent years, it has held steady at just over 3.5% for most employers. (New businesses in the construction industry have been subject to a higher beginning rate.) 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 Missouri, UI tax reports and payments are due by the last day of the month following each calendar quarter. In other words, reports and payments are due by the following dates:
When the date falls on a Saturday, Sunday, or holiday, the first working date following is considered timely. As a new employer, you should receive a liability notice from the DES. The DES grants new employers a 30-day extension from the date of the liability notice to file reports and pay taxes.
You can file your reports:
To file online, use the DES’s Unemployment State Tax Automated Reporting (USTAR) system. Options for online payments include Automated Clearing House (ACH debit or credit), check, or credit card. To file on paper, use Form MODES-4-7. The DES mails a Form MODES-4-7, Quarterly Contribution and Wage Report, to employers near the last working day of each quarter. You can also download the form from the Publications and Forms section of the DOL website.
You must file quarterly reports even if no contributions are due or you paid no wages during the quarter. Penalties and interest will be assessed if you do not file a report on time.
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 who is eligible for unemployment benefits and how to file an unemployment claim. You can download a notice (Form MODES-B-2) from the Mandatory Posters section of the DOL website that meets all legal requirements.
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 Missouri UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and DES websites for the latest 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 on Nolo.com.