How to Pay Unemployment Insurance for Employees in the District of Columbia

Everything employers need to know about paying unemployment insurance taxes in District of Columbia.

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

Register With the Department of Employment Security

As a District of Columbia employer, your small business must establish a UI tax account with the DC  Department of Employment Services  (DOES). You can register for an account with DOES either online or on paper. Once registered, you’ll be issued a UI tax account number.

To register online, you can go to the  New Business Registration  section of the website for DC’s Office of Tax and Revenue (OTR). You may also be able to register online through a  new website  being rolled out by DOES. To register on paper, use Form FR-500,  Combined Business Tax Registration Application. The form covers registration of your business for multiple purposes. Part VI of the form covers registration for UI tax. Blank forms are available for download from the  Forms and Publications  section of the OTR website. There is no fee to register your business with DOES.

Note:  To establish your District of Columbia 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

Unlike other states, DC’s unemployment compensation law does not have a minimum amount of wages that must be paid before an employer is liable for UI tax. Instead, it is assumed that typical employers will be liable simply if they have an employee. By contrast, under the Federal Unemployment Tax Act (FUTA), typical for-profit employers are liable for FUTA taxes if, during the current or preceding calendar year, they either:

  • paid wages of $1,500 or more in any calendar quarter, or
  • had one or more employees at any time in each of twenty calendar weeks.

Different rules, not covered here, apply to agricultural 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.

Wage Base and Tax Rates

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 for many years in DC. However, it’s always possible the 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 has been equal to the average rate of contributions paid by all employers during the preceding year, or 2.7%, whichever is higher. In practice, in recent years this has meant a 2.7% rate. The new employer rate generally remains in effect for 4-5 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.

For additional information, check the  Tax Rate Questions section  of the DOES website.

File Quarterly UI Tax Reports and Payments

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

Quarter

Months

Report Due Date

First

January, February, March

April 30

Second

April, May, June

July 31

Third

July, August, September

October 31

Fourth

October, November, December

January 31

You can file your reports and payments online or on paper. (While not covered here, you can also file reports on magnetic media, like a CD.) To file online, use DOES’s  Employer Self Service Portal. To file on paper, use Form UC-30,  Employer’s Quarterly Contribution and Wage Report. DOES mails Form UC-30 to all employers near the end of each quarter. The forms are preprinted with information specific to your particular business. If you do not receive a form, you should contact DOES to obtain a duplicate. Failure to receive a form does not relieve you of your responsibility to file.

As long as you are still in business you must file a Contribution and Wage Report when it is due. You must file a report even if you don’t have any employees and pay no wages during the quarter. (This latter situation is known as filing a zero wage report.) You will be subject to a penalty if you fail to file.

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 District of Columbia UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and DOES websites for the latest information. DOES also has a helpful publication,  Unemployment Insurance Handbook for Employers, that you can download from the DOES 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, required reporting of new hires, and required retention of employee records. You can get more information about other  small  business  tax issues  in other articles here on Nolo.com.

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