Texas Unemployment Tax
Employer Responsibility
What is unemployment insurance tax?
Unemployment Insurance (UI) tax is a tax employers pay to fund unemployment compensation for workers who lose their jobs.
Who must pay state unemployment tax?
The Texas Unemployment Compensation Act (TUCA) requires Texas employers - including sole proprietorships, partnerships and corporations - to pay UI tax. Employers must pay UI taxes if they:
- Pay at least $1,500 in wages in any one calendar quarter during the current or preceding calendar year, or
- Employ at least one worker for a day or more each week for 20 weeks during a year, or
- Acquires or otherwise receives, through any means, all or part of the organization, trade, business, or workforce of a subject employer, or
- Are a 501(c)(3) nonprofit organization (excluding churches and religious organizations) and have at least four employees for part of a day or more each week for 20 weeks, or
- Elect to become a subject employer, or
- Have Texas employees and are subject to the Federal Unemployment Tax Act (FUTA), or
- Are a state political subdivision that one or more political subdivisions own, or
- Pay $1,000 or more wages one calendar quarter for domestic service, or
- Pay $6,250 or more wages one calendar quarter for farm or ranch labor, or
- Employ a seasonal worker on a truck farm, orchard or vineyard, or
- Employ a migrant and a seasonal worker doing the same work at the same time and location (Otherwise, the law may not cover seasonal workers)
Do employers withhold UI tax from workers' wages?
No. Only employers pay the tax.
How does the law define employment?
Employment is any service workers perform for wages. This definition includes any hiring contract, whether written, oral or implied. TUCA applies to services individuals perform for wages, unless the Texas Workforce Commission (TWC) deems otherwise. If you are uncertain of your TUCA status, contact TWC.
What constitutes wages?
Anything an employer pays for services is wages. This definition includes cash wages and the cash value of gratuities employers exchange for labor.
Liable employers must:
- Register with TWC
- Report employees' names, social security numbers and total gross wages quarterly
- Pay tax on all employees quarterly
When are quarterly tax and tax reports due?
The reports and tax are due by the end of the month after each calendar quarter (April 30, July 31, October 31 and January 31). TWC assesses penalties for late reporting and late payment.
How does the state compute UI tax?
The first $9,000 a year employers pay each employee is taxable. Employers' tax rate and the taxable wages they pay determine the amount they owe. New employers pay at a rate of 2.70%. Employers receive an experience rate after 6 calendar quarters. Their experience rate will vary depending on taxable wages reported and individual claims charged against their account.
How can I get forms and more information?
Contact your local TWC tax office at http://www.texasworkforce.org/ui/tax/taxoff.html
Write to:
Texas Workforce Commission
101 E. 15th St., Room 514
Austin, TX 78778 or
Internet: http://www.texasworkforce.org/
E-mail: tax@twc.state.tx.us
The TWC administers state job programs, provides applicant and employer services, collects UI tax and issues UI compensation.
Auxiliary aids and services are available, on request, to individuals with disabilities.
PI-5 (1196)