If your small business has employees working in New Jersey, you’ll need to pay New Jersey unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In New Jersey, 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 New Jersey’s UI tax.
As a New Jersey employer subject to UI tax, your small business must establish an account with the New JerseyDepartment of Labor and Workforce Development (LWD), which administers the state’s UI program. You register for UI tax and other business taxes through the New Jersey Division of Revenue and Enterprise Services (DOR). You can register with the DOR either online or on paper. For New Jersey businesses (corporations, LLCs, registered partnerhips), you’ll need your New Jersey-issued business ID number to complete the registration process.
To register online, go the DOR’s NJ Business Gateway Services website. To register on paper, complete Form NJ-REG, Business Registration Application. You can download a blank Form NJ-REG with instructions from the business forms section of the DOR website. You can submit Form NJ-REG by regular mail or in person. There is no fee to register your business with the DOR.
Note: To establish your New Jersey 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.
Shortly after you register, the DOR will mail you a confirmation letter that includes your EIN as well as a Personal Identification Number (PIN) that you will need to file employer taxes online.
In New Jersey, most for-profit employers are liable for state UI taxes if one of the following is true:
To be liable under FUTA, and therefore also under New Jersey law, you generally must either:
New Jersey also has a rule stating that if you start a business, employ one or more individuals, and pay wages of $1,000 or more in a calendar year, you “may” be subject to the state’s UI tax and, in any case, must register with the DOR as discussed above. 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, generally increases by either $500 or $600 every year in New Jersey. In recent years, it has approached and then exceeded $32,000.
The state UI tax rate for new employers, also known as the standard beginning tax rate, also can change from one year to the next. In recent years, it has been between 3.0% and 3.5%. 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.
Unlike most other states, New Jersey combines its UI tax and withholding tax reporting and payments. Reports and payments are due 30 calendar days after the close of the quarter. (This, too, is unlike many other states, where reports are due on the final day of the month following the calendar quarter.) In other words, in New Jersey UI tax returns are due by the following dates:
The due date for filing is absolute. There is no extension if a due date falls on a weekend or holiday. Employers will not receive reminders of due dates.
You must file your reports and payments electronically (online). This generally means using the DOR’s On-Line Filing Service. However, you also have the option to upload reports using a Secure File Transfer Protocol (SFTP) system. Technically, you will be filing Form NJ-927, Employer’s Quarterly Report, and Form WR-30, Employer Report of Wages Paid. However, downloadable or paper versions of these reports are no longer available. You must pay by Electronic Fund Transfer (EFT), credit card, or E-check. For a more detailed explanation of online filing and payment options, check the DOR’s Guide to Electronic Filing and Payment Services.
You must file quarterly returns even if you had no payroll for a quarter. You will be subject to a penalty if you fail to file or file late.
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 UI benefits and how to file an unemployment claim. You can download a notice from the Posters section of the LWD 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 New Jersey UI taxes. Avoid possible penalties for making mistakes by checking the IRS, DOR, and LWD 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.