If your small business has employees working in Utah, you’ll need to pay Utah unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In Utah, 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 Utah’s UI tax.
As a Utah employer, your small business must establish a Utah UI tax account with the Utah Department of Workforce Services (DWS). You can register for an account with DWS either online or on paper. Once registered, you’ll be issued a UI account number.
To register online, you can use either:
To register on paper, use Form 1, Status Report. Blank forms are available for download from the Tax Forms section of the DWS website.
There is no fee to register your business with DWS. DWS will not establish an account for your business until wages actually have been paid.
Note: To establish your Utah 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 Utah for-profit employer, you generally are subject to the state’s Employment Security Act (Utah’s UI-related laws) if you meet any of the following conditions:
Regarding the last listed item, you generally are considered an employer subject to FUTA if either:
Different state and federal 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, recently has been increasing by at least $500 each year in Utah. Most recently, the amount has surpassed $32,000.
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 Utah, the beginning rate depends on an employer’s “industry.” In other words, it depends on what kind of business you have. In simplest terms, your starting rate generally will be based on the average rate for your industry. An established employer is subject to a so-called earned rate, which can be lower or higher rate than a new employer’s rate depending on the established employer’s experience rating. This means, among other things, whether the established employer has ever had any employees who made claims for state unemployment benefits.
For current information and more details about the wage base and tax rates, check the Tax Rates section of the DWS website.
In Utah, UI tax reports and payments are due the last day of the month following the end of the calendar quarter, as follows:
Most employers can file reports online or on paper. Large employers must file electronically. To file online, go to the Employer Login section of the DWS website. You will need to create a user account and, for your first online filing, enter information about your employees. To file on paper, use Form 794, Insured Employment and Wage Report. You can download blank forms from the Tax Forms section of the DWS website.
You can make payments online using Electronic Funds Transfer (EFT) at the Employer Login website. You also can pay by check.
You must file quarterly reports even if wages are not paid during the quarter, until DWS closes your account or determines that your business is exempt from reporting requirements. 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 provides employees with basic information on how to file an unemployment claim and what kinds of benefits may be available. You can download an Unemployment Insurance Notice to Workers from the UI Publications section of the DWS 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 Utah UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and DWS websites for the latest information. DWS also has a helpful online Employer Handbook/FAQ page. 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 also can get more information about other small business tax issues in other articles on Nolo.com.