2014 Unemployment and Disability Insurance Taxable Wage Bases AnnouncedHR Resource
October 30, 2013 — 2,455 views
Unemployment insurance financially assists workers that have lost their jobs through no fault of their own. This financial assistance is provided on a temporary basis. In compliance with the federal law, unemployment insurance systems are administered at the state level. Each state establishes its own rules and regulations regarding the amount, eligibility and duration. According to the Federal Unemployment Tax Act, employers must pay a federal tax of 6% of the first $7,000 paid to employees. Additional contributions are also required by most states from employers. A few states require employees to also take part in contributions to unemployment insurance.
Disability insurance is one where the earned income of the beneficiary is insured against risks that a certain disability may create an obstacle that hinders the worker from completing the core functions of his work. This encompasses paid sick leaves, short term and long term disability benefits.
State Specific Unemployment and Disability Taxable Wage Base:
Each state has its own specific rates for unemployment and disability insurance taxable wage base. Most employers are required to pay unemployment insurance contributions to the state. These contributions to the state are based on the wages that employers pay out to their employees, up to a maximum limit of the state’s taxable wage base. These contributions are what fund unemployment benefits. Certain states may have their taxable wage base set in law, whereas other states inflation-adjust this wage base every year. Although the total wages that are being paid to an employee must be reported in each quarter, any payment which exceeds the state’s wage base is not taxed. A few states have also adopted disability insurance systems. These disability insurance systems are funded by contributions from employers and sometimes even employees. These contributions are tied to a taxable wage base.
Federal Unemployment Insurance Taxable Wage Base:
Employers are also responsible for federal unemployment taxes which are based on the wages that they pay their employees, up to a $7,000 taxable wage base. Wages that are paid to employees that exceed this taxable wage base are not subject to federal unemployment taxes. This federal wage base is set by law and can be changed only with a Congress passed legislation.
Employee misclassification takes place when a worker is incorrectly classified as a contractor instead of an individual employee. This is a costly mistake and can lead to significant penalties if not corrected immediately. This is because individuals that are misclassified by employers as contractors are deemed to have failed to report wages and pay related unemployment insurance tax.