How Is My Tax Rate Determined?

You compute your tax on the taxable amount of the first $8000 earned by each worker. All unemployment insurance programs are "experience rated," which means that the amount of tax an employer pays is directly related to his experience in the program; that is, the amount of tax paid in compared to the amount of benefits paid out.

First, a rate must be assigned to a new employer before there can be any experience rating. Once an employer begins to pay tax (and possibly be charged benefits), the division keeps track of the balance in his reserve account. Once your reserve ratio is determined, your rate is assigned by finding the tax bracket that the ratio falls in for the tax schedule in effect for the year. The division issues a "Notice of Contribution Rate" annually to each active employer indicating the new rate and containing the information used in calculating it.

In addition to the unemployment tax, which you are required to pay, you may make additional payments into your reserve account to reduce a deficit balance or to increase a positive balance. Since tax rates are based on reserve account balance, changing your balance can lower your next year's tax rate.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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