Employer’s Guide to the Massachusetts Unemployment Insurance Tax

Everything employers need to know about paying Massachusetts unemployment insurance taxes.

If your small company employs people in Massachusetts, you must pay the Massachusetts unemployment insurance (UI) levy. The UI tax pays for unemployment insurance programs for qualifying workers. In Massachusetts, the state unemployment insurance levy is simply one of numerous taxes that companies must pay.

Varied states have different UI tax policies and rates. Here are the fundamentals of Massachusetts’ UI tax.

Become a member of the Department of Unemployment Assistance.

As an employer, you must open a Massachusetts Unemployment Insurance Tax Account with the state’s Department of Unemployment Assistance (DUA). To create an account, go to the DUA’s UI Online page and register (also known as the QUEST system). The following day, you should get your account number. There is no cost to register your company with the DUA.

You will need a federal employer identification number to set up your Massachusetts UI tax account (EIN). You may get an EIN by visiting IRS.gov. In most cases, if you apply online, you will obtain your EIN very instantly.

Unemployment Insurance Tax Liability Regulations

As a for-profit employer in Massachusetts, you are normally responsible for the state’s unemployment insurance levy if:

You employ one or more people on a permanent, temporary, or part-time basis on one or more days in each of the 13 weeks of the calendar year, or you pay $1,500 or more in any calendar quarter.

Regarding the first of these two requirements, keep in mind that it is not required for you to be accountable if the weeks of work are consecutive or if the employees stay the same. Different restrictions apply to agricultural laborers, domestic (in-home) workers, and employees of certain (but not all) non-profit organizations, which are not included here. Furthermore, liability standards under the Federal Unemployment Tax Act (FUTA) vary somewhat from Massachusetts state laws.

Wage Structure and Tax Rates

Massachusetts mandates you to pay UI taxes up to a certain percentage of each employee’s salary. This sum is known as the taxable wage base, and it is $15,000. The sum is subject to alter in subsequent years.

The unemployment insurance tax rate for new employers, which has recently been slightly above or below 2%, is also vulnerable to change. Depending on “experience,” established employers are liable to a lower or higher tax than new firms. This includes, among other things, whether your company has ever had workers file claims for state unemployment benefits. The DUA should send an annual notification to established enterprises informing them of their UI tax rate for the next year.

Massachusetts allows you to postpone a portion of your tax bill during the first and second quarters of the year. Visit the DUA website for further information.

One piece of good news is that state UI tax payments are often deductible from federal unemployment (FUTA) taxes.

File UI Tax Returns and Payments on Time

In Massachusetts, unemployment insurance tax reports and payments are due one calendar month after the end of each calendar quarter. To put it another way:

Returns and payments for the first quarter are due on or before April 30.
Returns and payments for the second quarter are due on or before July 31.
Third-quarter returns and payments are due by October 31, and fourth-quarter returns and payments are due by January 31.

If the due date occurs on a weekend or holiday, payments made the next business day will be received on time.

UI tax reports and payments must be submitted online using the DUA’s UI Online system.

Make a Public Notice (Poster)

You must display a notification (poster) about state unemployment insurance in a visible location for all workers. The poster gives basic information on how to apply for unemployment benefits. You may get a poster that fits the legal standards (Form 2553-A) from the DUA website’s Forms and Publications area.

Employees should not be misclassified as independent contractors.

Employers that hire independent contractors rather than employees are exempt from the UI tax. It is critical, however, that you should not misclassify an employee as an independent contractor. If you misclassify an employee, you may face penalties or fines.

Using Payroll Service Providers

You may decide that it is easier to delegate payroll obligations, including UI taxes, to an outside payroll agency. If this is the case, bear in mind that your company, or even you personally, may be held directly liable for errors made by an outside payroll firm.