Unemployment tax rates to change
OLYMPIA -- Many Washington employers will see changes in the amount of unemployment tax they will pay next year as a result of 2003 legislation now taking effect.
Overall unemployment taxes are expected to shrink an average of 1.35 percent, and tax payments per employee will decrease more than 3 percent from an average of $600 in 2004 to an average of $578 in 2005, the state Employment Security Department announced Thursday.
However, the amounts vary widely among individual employers based on several criteria including how often they lay off workers.
``Some employers will pay lower taxes in 2005, but others will see their taxes increase,'' said Employment Security Commissioner Sylvia Mundy, who called the revised rules ``the most substantial change in unemployment tax laws in Washington history.''
The first tax payments using the new rates are due April 30, 2005.
New calculation rates
Effective Jan. 1, tax rate contributions will be calculated based on a single tax rate schedule based on an employer's history of laying off or retaining workers.
The new schedule will range from zero percent to 5.4 percent of taxable wages for established businesses. It replaces the previous system that used seven schedules.
Forty rate classes will be in effect -- double the number now used.
More rate classes will result in fewer employers within each individual rate class, which should mean fairer tax rates for each employer, the department said.
The fixed rates also make it easier for employers to budget future unemployment insurance costs.
Each rate will have a social cost added, which is designed to recoup payments from the unemployment trust fund that are not charged to a specific employer.
Employers will also continue to pay an additional tax denoted as the Employment Administration Fund that pays for special work search assistance and training for the unemployed.When all these rates are combined, employers will pay taxes between 0.83 percent to 6.52 percent of taxable wages next year, the department said.The amount of worker wages that are taxed will also increase under state law. Employers will pay unemployment taxes on the first $30,500 of a worker's wages in 2005, up from $30,200 this year.New tax rate rules
The law also establishes new tax rules for employers who take over existing businesses. These businesses are typically referred to as ``successors'' in unemployment regulations, and include businesses that buy or otherwise acquire a portion or all of another employer's operating assets or trade.Effective Jan. 1, successors who are not established employers at the time of transfer will pay the same tax rate currently assigned to the previous owner. Starting in 2006, the tax rate will be calculated using a combination of the successor's own worker retention history and the worker retention history transferred from the previous owner.
Rules for new employers
New employers do not have an established history of worker retention by which to gauge their company's potential impact on the unemployment trust fund. As such, their tax rates are determined by their particular industry. Starting in 2005, new employers will be assigned a calculation rate equal to the average tax rate within their industry plus an additional 15 percent of that rate. Buying down to lower rate
The Employment Security Department is offering employers a voluntary contribution program that may help them control their unemployment insurance by buying down to a lower tax rate.The program is best suited to employers whose unemployment taxes have risen at least 12 rate classes in the past year as a result of many former workers filing for unemployment benefits, and who are now increasing their work force, the department said.
Employers pay a voluntary fee based on the amount the state paid in unemployment benefits to their workers over the past two fiscal years plus a surcharge.
Employers must pay an amount equivalent to dropping four or more tax rate classes. By doing so, the employer will owe fewer taxes in 2005.
The employer will retain the lowered benefit charge amount for calculation of their taxes for the following three years. The tax rate should remain low provided there are few or no additional layoffs, the department said.
On the NetFor more information about unemployment tax laws and online
filing, visit the Employment Security Web site: www.wa.gov/esd.
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