Unemployment insurance provides temporary partial wage replacement to workers who lose their jobs through no fault of their own. The benefits are funded by federal and state taxes paid by employers. We touch on the topic only lightly here and more thoroughly in the Business Taxes section.
Federal Unemployment Taxes
The FUTA (Federal Unemployment Tax Act) tax pays the administrative costs of the program at both the federal and state levels. Businesses file a Form 940 – Employer's Annual Federal Unemployment (FUTA) Tax Return once a year. It is generally due one month after the year ends. There are three tests used to determine whether you must pay FUTA tax: a general test, household employees test, and farmworkers employees test.
Under the general test, an employer is subject to FUTA tax on the wages paid to employees who aren't household or agricultural employees and must file Form 940.pdf, Employer's Annual Federal Unemployment (FUTA) Tax Return for 2018 if:
- The employer paid wages of $1,500 or more to employees in any calendar quarter during 2017 or 2018, or
- the employer had one or more employees for at least some part of a day in any 20 or more different weeks in 2017 or 20 or more different weeks in 2018. Count all full-time, part-time, and temporary employees. However, if the business is a partnership, don't count its partners.
State Unemployment Insurance Taxes
Under Minnesota Unemployment Insurance Law, every individual or organization that pays covered wages in Minnesota must register with the Minnesota Unemployment Insurance (UI) Program. Registration should be done as soon as possible after the first wages are paid for covered employment in Minnesota. Registration must occur prior to the due date of the first quarterly wage detail report the employer is required to submit. However, employers do not register until covered wages have actually been paid.
Certain employers have different registration requirements for unemployment insurance than those stated in the paragraph above, depending on their legal organization and/or their type of business. For more information, see the following sections of the Unemployment Insurance (UI) Employer Handbook:
For information about voluntarily electing coverage for non-covered employees, reference the Covered/noncovered employment section of the Unemployment Insurance (UI) Employer Handbook.
Special provisions exist for business entities in determining whether or not employment is covered. The following are not covered for Minnesota unemployment insurance tax purposes:
- Sole Proprietorship. Services performed by a sole proprietor's spouse, parents, or children under the age of 18. A sole proprietor paying only these employees does not need to register.
- Partnership. Services performed by the partners of a partnership. A partnership paying only these individuals does not need to register.
- Corporations and LLCs (Limited Liability Companies). Wages of owner/officers or members who own 25 percent or more of a corporation or LLC. A corporation or LLC paying only these owner/officers or members does not need to register for an employer account. Employers may voluntarily extend coverage to these employees by electing optional coverage for them.
For information about voluntarily electing coverage for non-covered employees, reference the Elect Coverage for Noncovered Employees section of the Unemployment Insurance (UI) Employer Handbook
Tax Rate Information
Employers with covered employment must pay quarterly unemployment insurance tax into the Minnesota Unemployment Insurance Trust Fund (the Fund), which is used solely to pay unemployment benefits. This tax is a percentage of the taxable wages paid to employees and may not be withheld from employee wages.
Employers that have only paid wages for a short time will be assigned one of two new employer tax rates, depending on their type of business - a rate which is the computed average rate of all employers or a rate which is assigned to employers in a high experience rating industry - each year until the employer qualifies for an experience rating. Each employer's tax rate is comprised of several factors, which may change yearly depending on the balance in the Fund.
Once an employer qualifies for an experience rating, their tax rate will be determined by dividing the total unemployment benefits paid to former employees by the total taxable wages paid to all of their employees. Reference the Experience Rating section of this handbook for more information.
Employers with an active employer account will receive a Tax Rate Determination in the mail every December that assigns the upcoming year's tax rate components and taxable wage base. The Tax Rate Determination informs the employer of their right to appeal if they disagree with the tax rate assigned to their account.
View unemployment insurance Unemployment Insurance (UI) Tax Rates
Assessments for 2019
Workforce Development Assessment(not a UI tax) - 0.10% of taxable wages.
There is no Additional Assessment or Federal Loan Interest Assessment for 2019.