If your small business has employees working in Nebraska, you’ll need to pay Nebraska unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In Nebraska, 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 Nebraska’s UI tax.
As a Nebraska employer, your small business must establish a Nebraska UI account with the Nebraska Department of Labor (DOL). You can register for an account with the DOL either online or on paper. Once registered, you’ll be issued a UI account number. To register online, use the DOL’s UIConnect website. To register on paper, use UI Form 1, Application for an Unemployment Insurance Tax Account Number. Blank forms are available for download from the Forms webpage in the UI Tax section of the DOL website. There is no fee to register your business with the DOL.
Note: To establish your Nebraska 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 a for-profit employer in Nebraska, you are liable for state UI taxes if any of the following are true:
In most cases, if you are liable under FUTA, you would be liable for Nebraska state UI tax, 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.
Your liability is determined on a calendar year basis. That means that if you become liable during any calendar quarter, you are liable for the entire year and the following year.
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 recent years, that amount, known as the taxable wage base, has remained steady at $9,000 in Nebraska. However, it’s always possible the amount could change.
The state UI tax rate for new employers, also known as the standard beginning tax rate, also is subject to change from one year to the next. In recent years, it has been based on the lesser of the state’s average tax rate or 2.5%, which in practice has meant a rate around 1.5% with small increases each year. New employers in the construction industry are subject to a higher starting 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 Nebraska, UI tax reports and payments are due by the end of the month following the close of each calendar quarter. In other words, reports and payments are due by the following dates:
You can file your reports and payments electronically (online) or on paper. To file and pay electronically, use the UIConnect website. When you file a report electronically through UIConnect, you also have the option to pay electronically through EFT (electronic funds transfer) or print out a voucher to mail in with a check. Large employers are required to file electronically.
To file on paper, use Form UI-11W, Wage Report, and Form UI-11T, Combined Tax Report. The DOL will automatically mail you a quarterly tax report with preprinted information for your business at the end of each calendar quarter. You can also download blank forms from the Forms section of the DOL website.
You are required to post a notice (poster) regarding state unemployment claims in a conspicuous place for all employees. The poster shows the text of the Nebraska law on making claims for benefits and claimant’s work search requirements. You can download a notice (Unemployment Insurance Advisement of Benefit Rights) from the Required Posters section of the DOL website.
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 Nebraska UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and DOL websites for the latest information. The DOL also publishes The Employer’s Guide to Unemployment Insurance, which you can view online or 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, and required reporting of new hires. You can get more information about other small business tax issues in other articles on Nolo.