Employer Qualifications and Special Circumstances
Method of Payment for State Unemployment Taxes
The two methods of payment under SUTA are reimbursable and contributory.
Only governments and qualifying nonprofit, 501(c)(3), employers can elect to be reimbursable. Instead of paying quarterly UI taxes based on payroll, reimbursable employers pay the state back for the actual unemployment benefits paid to their former employees. Reimbursable employers must still file quarterly wage reports each quarter, even though they do not pay quarterly contributions, and must report for the full year in which they qualify.
When a former employee receives UI benefits, the employer is invoiced for the amount paid and must reimburse the state within 30 days.
All employers that are not reimbursable are contributory. Most employers are contributory.
A contributory employer in Indiana is an employer who pays state UI taxes (also called contributions) based on a percentage of their employees’ wages. This is the standard method for most private employers. Contributory employers file quarterly reports and pay UI taxes on the first $9,500 of each employee’s wages. These taxes must be paid on or before the due date to avoid interest charges, late payment penalties, and collection costs.
Covered Employers / Covered Employment
Once a business becomes liable for unemployment taxes, the business is called a covered employer and the workers are engaged in covered employment for unemployment purposes. An employee must be engaged in covered employment before they can qualify for unemployment benefits based on the separation from the employer.
If the business falls below the level of qualifying employment, the employer may be eligible to terminate their unemployment account. The employer must fall below the level of qualifying employment for two consecutive years and must believe that they will never qualify again to apply for account termination.
Employers have until January 31st to file an application to terminate coverage for the current year. The organization must continue to file quarterly reports – even if the report is nothing to report - until it is notified that the account has been terminated or made inactive.
For UI premium purposes, there is no distinction between a full-time employee and a part-time employee. If an employee works for any amount of time during a calendar week, report the wages paid.
There is also no distinction between S-Corporations and business corporations (C-corporations) for UI tax purposes. All corporate officers must report all payments for services.
