Unemployment Insurance Tax Disputes in Washington DC

Businesses are responsible for paying employment taxes on behalf of their employees. Employers must deposit payments to the Social Security Administration, Medicare, and unemployment insurance (UI) administrators regularly, or face fines and other potential enforcement action.

Unemployment insurance tax disputes in Washington, D.C. can be challenging to handle on your own. Speak with one of our local TFRP attorneys for help resolving the issue and preventing the problem from arising again.

Determining When to Pay the Taxes

According to DC’s Department of Employment Services, the taxable wage base for unemployment insurance tax purposes is $9,000. If an employee earns at least $9,000 during the first quarter of their employment, the employer owes unemployment insurance tax for that employee for that quarter. However, they will not owe unemployment insurance tax for that employee for subsequent quarters in the tax year.

If an employee does not earn the full taxable base wage during their first quarter of employment, the employer pays unemployment insurance tax on the amount the employee earned every quarter. The employer continues to owe the tax quarterly until the employee earns an amount equal to that year’s wage base.

Unemployment insurance taxes are paid into a trust fund dedicated to paying out claims made by workers who have lost their jobs. Failing to pay unemployment insurance tax as it accrues can lead to enforcement action. It is prudent and cost-effective for a DC employer to contact an unemployment insurance tax attorney immediately if they receive a notice of late payment.

How DC Calculates Unemployment Insurance Tax Rates

Calculating the unemployment insurance tax is complicated. Some disputes center around honest mistakes where employers miscalculated the amount of unemployment insurance tax they were liable to pay. A Washington DC attorney with experience in payroll taxes can help an employer calculate and verify their appropriate unemployment insurance tax rate.

Rate For Newly Liable Employers

Businesses with little or no history as employers in DC pay 2.7% unemployment insurance tax, or the average that all employers paid in the preceding year, whichever is higher.

Other Employers

After 36 months of paying the unemployment insurance tax, an employer’s rate is adjusted according to its history. The historical rate is determined by the employers’ taxable payroll over the preceding three years, the amount of unemployment benefits paid to the employer’s former workers, and the amount of unemployment insurance tax the employer paid.

The financial status of the unemployment insurance trust fund may also impact an employer’s rate. When the trust fund balance is low, employers pay a higher rate. Employers are informed of the rate they will pay in the coming year each December or January.

How UI Tax Disputes Can Arise

Paying unemployment insurance taxes late or using the wrong tax rate can spur enforcement action, but there are other ways that DC businesses may find themselves in an unemployment insurance tax dispute.

When a business merges or buys another, it is a successor business that inherits the tax rate paid by the target business in most cases. Problems reporting or documenting mergers, purchases, and transfers can lead to enforcement actions.

State or IRS audits can reveal these and other possible violations of payroll tax rules, and a knowledgeable tax lawyer can help you resolve any dispute concerning your UI obligations.

Resolve Unemployment Insurance Tax Issues with a Washington DC Attorney

Businesses liable for unemployment insurance taxes can incur penalties if they fail to remit the taxes held in trust. However, in many cases, disputes can be resolved without drastic consequences to the business or its financial health. If you are involved in an unemployment insurance tax dispute in Washington DC, contact Pontius Tax Law immediately and learn how we can resolve it.