Over the past five years, electronic filing and payment requirements for unemployment insurance tax compliance have become increasingly stricter throughout the states, the District of Columbia and Puerto Rico.
Employers in two of the most populous states, California and Pennsylvania, now have to comply with much stricter electronic requirements for which 2017 is first full year they are in effect, detailed later in this blog post. I expect that other states over the next few years as well will intensify their electronic unemployment tax compliance requirements to further enhance efficiency of unemployment program administration, facilitated by seemingly inexorable technological improvement that eases employers’ ability to comply.
The vast majority of states have a requirement regarding electronic filing of unemployment tax and wage reports, a requirement regarding electronic payment of unemployment tax, or both. Nine states have neither type of requirement, although it is highly likely that some of them will adopt one or both of these types of requirements in the near future to improve program administration. The nine states are Arizona, Colorado, Delaware, Indiana, Montana, Ohio, South Dakota, Washington and Wyoming.
Both an electronic filing and electronic payment requirement for unemployment tax compliance are in effect in 23 states, the District of Columbia and Puerto Rico. Fifteen states have an electronic filing requirement for unemployment program compliance but not an electronic payment requirement. Only Hawaii, Nevada and West Virginia have an electronic payment requirement for unemployment program compliance but not an electronic filing requirement.
In some cases, a state’s electronic filing or payment requirement for unemployment tax compliance is in effect for all employers, while in other cases, a state’s requirement is in effect for some but not all employers. For example, Massachusetts requires all employers to file unemployment tax and wage reports electronically and pay unemployment tax electronically, while Kansas’ electronic requirements affect only employers with at least 50 employees and third-party administrators submitting reports with unemployment tax or wage data for at least 50 employees among the reports.
All states that do not have an electronic filing or payment requirement in effect for unemployment tax compliance, or that have such requirements in effect for some but not all employers, actively encourage all employers to electronically file or pay anyway. Every state, the District of Columbia and Puerto Rico has an online portal for unemployment tax compliance through which employers can electronically fulfill their reporting and payment obligations under states’ unemployment tax laws.
New Requirements for California, Pennsylvania
Before 2017, California’s electronic filing requirement for unemployment tax compliance affected only employers with at least 250 employees and the state did not have a requirement for employers to pay unemployment tax electronically.
Effective starting with 2017, California employers with at least 10 employees must electronically file unemployment tax and wage reports and must pay unemployment tax electronically. All employers in the state must comply with electronic requirements for unemployment tax compliance starting with 2018.
Pennsylvania before 2017 required all employers to file unemployment tax and wage reports electronically but starting with unemployment tax due for the fourth quarter of 2016, some employers needed to comply with an electronic unemployment tax payment requirement.
The new electronic unemployment tax payment requirement for Pennsylvania is that when an employer has a total liability of at least $5,000 for a quarter among unemployment tax, interest and related penalties, the employer must pay unemployment tax electronically that quarter and for all subsequent quarters, regardless of the employer’s liability for subsequent quarters.
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