Everything employers need to know about paying Connecticut unemployment insurance taxes.
If your small company employs people in Connecticut, you must pay the Connecticut unemployment insurance (UI) levy. The UI tax pays for unemployment insurance programs for qualifying workers. In Connecticut, 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 Connecticut’s UI tax.
Become a member of the Department of Labor.
Your small company must open a UI tax account with the Connecticut Department of Labor as a Connecticut employer liable to UI tax (DOL). You open an account by registering your company with the DOL, either online or on paper. You will be given a Connecticut DOL registration number after you have enrolled. To register online, go to the DOL website and utilize the Connecticut Employer Registration System (CTERS). Use Form UC-1A, Employer Status Report for Unemployment Compensation, to register on paper. Blank forms may be downloaded from the DOL website’s Tax Forms section. The DOL does not charge a fee to register your firm for UI tax reasons (other types of tax registration can incur a fee).
You will need a federal employer identification number to set up your Connecticut 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 Connecticut employer, you must pay the state unemployment tax if you are also required to pay the federal unemployment tax under the Federal Unemployment Tax Act (FUTA). In general, you are responsible for state unemployment taxes if, during the current or previous calendar year, you either:
paid salaries of $1,500 or more in each calendar quarter, or had one or more workers at any time in each of twenty calendar weeks.
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.
Wage Structure and Tax Rates
Connecticut has long mandated UI taxes on the first $15,000 of each employee’s salary. However, this figure, known as the taxable wage base, is subject to change.
Almost every year, the UI tax rate for new employers varies. In recent years, it has often been between 3% and 5%. 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. Check the tax rates and taxable wage base table on the DOL website for an overview of the most recent rate and wage base information.
One piece of good news is that state UI tax payments are often deductible from FUTA taxes.
Submit UI Tax Returns and Payments Quarterly
In Connecticut, unemployment insurance tax reports and payments are typically due 30 days following the end of each calendar quarter. In other words, UI tax returns must be submitted by the following deadlines:
First-quarter reports and payments 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 10/31, while fourth-quarter returns and payments are due by 1/31.
If a payment is due on a Saturday, Sunday, or legal holiday, the deadline is moved to the next business day.
Unless the DOL grants you a waiver, you must submit UI tax returns and payments online. The DOL delivers UI tax forms to employers who are permitted to file on paper by the final business day of each quarter, if not sooner. Form UC-2, Employer Contribution Return, and Form UC-5A, Employees Quarterly Earnings Report, are the two most important paper forms. If filing on paper, include a payment check with your Form UC-2.
You may utilize the Connecticut Internet Tax and Wage System to file online. Payments may be made through the Automated Clearing House (ACH) or Electronic Funds Transfer (EFT) (EFT). The DOL offers paperwork for registering your company for each of these payment options.
After registering with the DOL and being found responsible for UI taxes, you must continue to submit quarterly reports even if you have no workers or no taxes are owed. If you do not file, you will be charged failure to file fees.
Make a Public Notice (Poster)
Connecticut, unlike most other states, does not require you to publish a notification (poster) about state unemployment insurance. Other notifications, such as those required by the Workers’ Compensation Act, are, nonetheless, required by state and federal law. Employer posters that fulfill the state’s legal standards may be downloaded from the DOL website’s agency forms 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.