If your small business has employees working in Ohio, you’ll need to pay Ohio unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In Ohio, 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 Ohio’s UI tax.
Note: Unlike other states, Ohio generally refers to its UI tax as “unemployment compensation” or “UC” tax.
As an Ohio employer subject to UI tax, your small business must establish a UI tax account with the Ohio Department of Job and Family Services (JFS). You must register for a UI tax account as soon as you employ at least one person who is covered by Ohio’s unemployment compensation law. Once registered, you’ll be issued a Unemployment Compensation (UC) tax account number.
You can register for an account with JFS either online or on paper. To register online, use the Employer Resource Information Center (ERIC). To register on paper, use Form JFS-20100, Report to Determine Liability. Blank forms are available for download from the Forms section of the JFS website. There is no fee to register your business with JFS.
Note: To establish your Ohio 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 Ohio, you generally are considered a liable employer under the Ohio unemployment compensation law if you meet either of the following requirements:
These are effectively the same rules that apply for liability under the Federal Unemployment Tax Act (FUTA). In fact, apart from the above two requirements, if you have been subject to FUTA in either the current or preceding calendar year, that also makes you liable for Ohio UI tax. So does acquiring a business that already was subject to Ohio’s UI law. 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, has been stable at $9,000 in Ohio since the year 2000. 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, can change from one year to the next. In recent years, however, it has been stable at 2.7%. (Except for new employers in the construction industry, who are subject to a significantly 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 Ohio, UI tax reports and payments must be filed no later than the last day of the month following the close of the calendar being reported. In other words, reports and payments are due as follows:
If the due date falls on a Saturday, Sunday, or holiday, the report must be postmarked by the next business day.
The report you need to file consists of two sections, the Wage Detail and the Quarterly Summary. The two sections are considered a single report for filing purposes. You can file your reports and payments online or on paper. To file and pay online, you can use either the ERIC system or the Ohio Business Gateway. To file on paper, use Form JFS-20125, Quarterly Tax Return (which contains both required sections). JFS should send you preprinted forms. You can also download blank forms from the Forms section of the JFS website.
You must file quarterly returns even if you had no employees and paid no wages during the quarter. In such cases, you must file a report indicating that you had no employment. You will be subject to a penalty if you fail to file.
You are required to post a notice (poster) regarding state unemployment claims in a conspicuous place for all employees. The poster states that your business provides unemployment compensation coverage for employees and provides basic information on how an employee can file an unemployment claim. You can download a notice (Form JFS-55341) from the Forms section of the JFS 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 Ohio UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and JFS websites for the latest information. JFS also publishes a helpful Unemployment Compensation Guide that you can download from the JFS 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 here on Nolo.com.