Everything employers need to know about paying Virginia unemployment insurance taxes.
If your small company employs people in Virginia, you must pay the Virginia unemployment insurance (UI) levy. The UI tax pays for unemployment insurance programs for qualifying workers. In Virginia, the state unemployment insurance levy is simply one of numerous taxes that companies must pay. Other major employer taxes not mentioned here include the federal unemployment insurance tax, as well as state and federal withholding taxes.
Varied states have different UI tax policies and rates. Here are the fundamental guidelines for Virginia’s UI tax.
Become a member of the Virginia Employment Commission.
Your small company must open a UI-related tax account with the Virginia Employment Commission as a Virginia employer liable to UI tax (VEC). If you believe your company may be subject to UI taxes, you should register with the VEC (see below). You may open an account with the VEC either online or in person. You will be assigned a VEC account number after you have enrolled.
Use the VATAX Online Services for Businesses homepage, which is part of the Virginia Department of Taxation (DOT) website, to register online. Form FC-27, Report to Determine Liability, is used to register on paper. Blank forms may be downloaded from the VEC website’s Forms/Publications area. There is no cost to register your company with the VEC.
You will need a federal employer identification number to register for a Virginia 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
In Virginia, most for-profit businesses are subject to state unemployment taxes if they are subject to federal unemployment taxes under the Federal Unemployment Tax Act (FUTA). This implies that you will be held accountable if you fulfill any of the following conditions:
You have one or more employees who work for any part of a day in any of the twenty weeks in a calendar year, your total gross payroll for any calendar quarter is $1,500 or more, or you purchase a company that is subject to UI taxes.
Different restrictions apply to agricultural (farm) workers, domestic (in-home) workers, and employees of certain (but not all) non-profit organizations, which are not included here.
One piece of good news is that state UI tax payments are often deductible from FUTA taxes.
Wage Structure and Tax Rates
Each employee’s salaries are subject to UI tax up to a certain yearly limit. In recent years, Virginia’s taxable salary base has remained steady at $8,000 per year. However, the quantity might alter at any time.
The state unemployment insurance tax rate for new employers, often known as the normal starting tax rate, varies from year to year. In recent years, it has consisted of a base tax rate of 2.5% plus so-called add-ons, which include a pool cost charge and a fund building charge. Both of the latter levies, which vary year to year, are much less than 1%. In recent years, the total start rate has been between 2.85% and 3.25%. Typically, the new employer rate is valid for at least one year.
Based on a “experience rating,” established employers are liable to a lower or higher rate than new firms. This includes, among other things, whether your company has ever had workers file claims for state unemployment benefits.
Check the VEC website for the most up-to-date pay basis and tax rate information.
Submit UI Tax Reports and Payments Quarterly
UI tax reports and payments are due in Virginia at the end of the month after the completion of a calendar quarter.
Employers with 100 or more workers are required to submit quarterly reports electronically (online). Smaller businesses may file electronically or on paper. Use the DOT’s VATAX Online Services for Businesses website to file online. Use Form VEC FC-20, Employer’s Quarterly Tax Report, and Form VEC FC-21, Employer’s Quarterly Payroll Report, to file on paper. Blank forms may be downloaded from the VEC website’s Forms/Publications area.
Payments may be made online via Automated Clearing House (ACH) debit. You may also pay by cheque. If you are sending a check without a report, you should download and print a Payment Coupon.
Even if no salaries were received during the calendar quarter, you must submit quarterly reports (along with any relevant payment) by the due date. If you do not file, you will face a penalty.
Make a Public Notice (Poster)
You must publish a notice (poster) about state unemployment claims in an area where all employees may see it. The poster includes general information on who is eligible for unemployment benefits and how to submit a claim. From the VEC website’s Required Posters area, you may obtain a notice that satisfies all legal requirements (Form VEC B-29, Notice to Workers).
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.
Further Information
This page simply covers the most fundamental aspects of Virginia UI taxes. Check the IRS and VEC websites for the most up-to-date information to avoid potential fines for inaccuracies. The Virginia Employer’s Handbook is another useful online resource available from the VEC website’s Forms/Publications area. Employers must also pay federal unemployment insurance, state and federal withholding taxes, and record new employees, in addition to state unemployment insurance.