Unemployment Insurance Information

Tax Information

What is Unemployment Insurance Tax?

Unemployment Insurance tax is a tax on employer payrolls paid by employers and used to provide funds from which unemployment benefits are paid to qualified unemployed workers. Unemployment tax is not deducted from employee wages.

Unemployment tax payments made by employers are transferred to the Unemployment Insurance Trust Fund in Washington. Employers receive credit for tax payments which are posted to an experience rating account.

These credits are used to determine the rate schedule from which the tax rates for contributory North Carolina employers are assigned on an annual basis. Each year a prorated share of the interest earned on this trust fund is added back to the experience rating account of each North Carolina employer having a credit balance.

Employers subject to North Carolina unemployment tax pay quarterly tax on a percentage of their payroll. Most newly liable employers will use the standard beginning tax rate as shown below. Employers are notified of their official tax rate by letter if determined liable for unemployment insurance tax.

Year	Standard Beginning Tax Rate	Taxable Wage Base
2006	1.200% (.01200)	$17,300
2007	1.200% (.01200)	$17,800
2008	1.200% (.01200)	$18,600
2009	1.200% (.01200)	$19,300
2010	1.200% (.01200)	$19,700
2011	1.200% (.01200)	$19,700
2012	1.200% (.01200)	$20,400

If you need information for a year not shown, contact Status at (919) 707-1170.

Experience Rating Accounts
North Carolina Unemployment Insurance tax rates are determined under an experience rating system. An Unemployment Insurance tax account is established for each employer determined liable under the Employment Security Law.

The employer’s account is initially assigned a standard tax rate prescribed by law. After approximately two years, an employer’s tax rate is determined annually based on experience. Experience rating is affected by payroll, tax paid, timeliness of payments and UI benefits charged against the employer’s account. Based on economic conditions, an employer’s tax rate could be as low as .00% and as high as 6.84%.

In November of each year, active employers will be mailed Form NCUI 104, Unemployment Tax Rate Assignment, showing the calculation of the tax rate for the succeeding calendar year. Experience rating accounts are maintained for rating purposes only. This statement requires no payment, nor can it be used to pay tax due. The tax rate shown on the Form NCUI 104 becomes final unless protested in writing prior to May 1 of the following year.

NOTE: No employer’s contribution rate shall be reduced below the standard rate for any calendar year until its account has been subject to being charged with benefits for at least 12 calendar months ending July 31 immediately preceding the computation date (August 1) or its liability extends over a period of all or part of two consecutive calendar years.

The system allows an employer to make a voluntary contribution to reduce the tax rate. Voluntary contributions must be made within 30 days following the date Form NCUI 104 was mailed. A check for the voluntary contribution must be made payable to the Division of Employment Security and mailed to:

How are tax rates calculated?

Each employer's tax rate is assigned based on the rate schedule in force and his/her own experience. Experience includes length of liability, tax payments, taxable payroll, timeliness of payments, and benefit payments charged. Form NCUI 104 is a summary of these factors. Use the DES site, www.ncesc.com, Business Quick Links, to view your tax rate and benefit charge information and to calculate a voluntary contribution.

Each employer's payroll for the last 3 fiscal years as of July 31 of the current year is divided into the applicable credit or debit balance to yield a ratio. This ratio is applied to the applicable rate schedule and determines the tax rate.

Tax Rate Tables

Are all employers treated the same in regard to tax rate assignment?

Tax rates are assigned to all subject employers based on the rate schedule in effect for that calendar year. The rate schedule in effect for a given year is determined by the solvency of the Unemployment Insurance Trust Fund.

How can the rate increase, even if there are no benefit charges?

The amount of your total taxable payroll for three fiscal years, benefit charges to your account, and the rate schedule in effect are all factors that can potentially cause an increase in your assigned rate.

Why wasn’t the rate reduced by fifty percent (50%) this year?

On the Computation Date, the Unemployment Insurance Trust Fund did not equal or exceed 1.95 percent of the Taxable Wages reported to the Commission in the previous calendar year, in accordance with North Carolina General Statute 96-9 (b) (3) d.

If timely voluntary contributions are made, will another NCUI104 be sent?

No, a written notice will provide you with confirmation of your new tax rate, but you will not receive another detailed summary of your account. However, the summary you receive the following year will reflect the voluntary contributions you made. These contributions must be postmarked on or before the Final Date for Voluntary Contributions shown on the top of Form NCUI104. DES offers an online service to calculate the effects of voluntary contributions to your account. To locate the voluntary contribution calculator, use the Business Quick Link on our Home page.

Why is a twenty percent (20 %) State Reserve Tax (SR Tax) being imposed?

A 20% SR Tax is imposed upon contributions in any calendar year when the amount in the Unemployment Insurance Reserve Fund does not equal or exceed one hundred sixty-three million three hundred forty-nine thousand dollars ($163,349,000) in accordance with North Carolina General Statutes 96-9(b)(3)j.

How will this affect my tax rate?

Your rate will increase by approximately 20%. The rate you are assigned will be the combined or composite rate based upon the applicable tax table as indicated on your tax rate statement.

Is this surcharge FUTA certified?

The SR Tax is NOT FUTA certified. The Division of Employment Security will only certify .83333 of the total taxes paid.

When will this SR Tax take effect and how long will it affect my rate?

The SR Tax was implemented effective January 1, 2005. It will remain in effect for any calendar year in which the State UI Reserve Fund does not equal or exceed $163,349,000. Tax rates are calculated based upon three fiscal years of taxable payroll; therefore the SR Tax implemented for the year 2008 will affect rates for the year 2009 and 2010.

Will all employers be affected?

The SR Tax applies to all employers who are paying UI Contributions based upon payroll.

Can the tax rate be protested?

Written protests must be postmarked between the statement mailed date and May 1st of the year to which the tax rate applies. Valid protest must be signed by an owner, partner, or corporate officer. An example of a valid protest is one in which an error has been found in the figures used for calculation of tax rates. Protest of the SR Tax would require a change in the law.

If you have further questions or need assistance please email esc.tax.status@ncesc.gov or call us at (919)707-1170.

How are Federal Unemployment Tax (FUTA) and State Unemployment Tax (SUTA) Related?

Employers liable to a state(s) for unemployment insurance tax receive FUTA credit for timely tax payments made to the state(s).

For the calendar year 2011, all employers in North Carolina will have a 0.3 percent reduction in their FUTA tax credit. Federal law requires this reduction when a federal loan taken to meet state unemployment insurance benefit payments is not repaid within two years. Due to recent economic conditions, North Carolina, as well as many states, had to borrow money from the federal government in order to meet unemployment insurance benefits obligations. The increased revenue associated with this reduced credit will be used by the federal government to repay the loan.

Additionally, there is a FUTA surcharge of 0.2 percent that expired on June 30, 2011. Due to the expiration of the surcharge and the FUTA tax credit reduction, North Carolina employers will be required to pay a FUTA tax rate of 1.1 percent from January 1, 2011 through June 30, 2011 and 0.9 percent from July 1, 2011 through December 31, 2011.

The state taxable wage base differs from the federal taxable wage base and is recomputed each year. Employers are notified of the taxable wage base applicable for the coming calendar year each fall on their tax rate notification. The taxable wage base is also printed on the Employer's Quarterly Tax and Wage Report.

Maintaining Adequate Records
All employers must maintain records for each person they employ (including corporate officers). These records must show:

The employee's name and social security number.
The beginning and ending dates worked.
The amount of wages paid.
All other payments made to the employee including vacation pay, tips and the reasonable value of board and lodging or other remuneration for services.

Records must be maintained for at least five years and be available for inspection by authorized personnel of the Division of Employment Security.

Who is Liable for Unemployment Tax?

A general business employer with at least one worker in 20 different calendar weeks during a calendar year, or with a payroll of at least $1,500 in any calendar quarter;
An employer who acquires substantially all or any portion of a liable business in North Carolina;
If approved by the Division, an employer voluntarily choosing coverage not required by law;
An employer subject to FUTA;
A 501(c)(3) non-profit organization with at least four workers in 20 different calendar weeks during a calendar year;
An employer with agricultural labor of 10 or more workers on any day during 20 different weeks in a calendar year, or with $20,000 or more in gross payroll for any calendar quarter;
An employer with domestic employment in a private home, college club, fraternity or sorority with a payroll of at least $1,000 in any calendar quarter;
A state or local government agency or department;
An employee leasing company or temporary help company that, under contract, supplies individuals to perform services for clients or customers.
Any Indian Tribe as defined in the Federal Unemployment Tax Act, 26 U.S.C. § 3301 et seq.

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Unemployment Insurance Information