Filing and Paying Unemployment Taxes to State Governments

By Lita Epstein

States collect their unemployment taxes on a quarterly basis, and many states allow you to pay your unemployment taxes online. Check with your state to find out how to file and make unemployment tax payments.

Skipping out on state taxes isn’t a good idea. If you don’t pay your state taxes, you may end up with a lien filed against your business. You may also end up facing penalties and interest charges for late payments. And if the state has to take you to court to collect back taxes, you’ll have to pay court and processing costs in addition to the back taxes, penalties, and interest.

Unfortunately, the filing requirements for state unemployment taxes are much more difficult to complete than those for federal taxes (see the discussion of Federal Form 940 above). States require you to detail each employee by name and Social Security number because that’s how unemployment records are managed at the state level.

The state must know how much an employee was paid each quarter in order to determine his or her unemployment benefit, if the need arises. Some states also require you to report the number of weeks an employee worked in each quarter because the employee’s unemployment benefits are calculated based on the number of weeks worked.

Each state has its own form and filing requirements. Some states require a detailed report as part of your quarterly wage and tax reports. Other states allow a simple form for state income tax and a more detailed report with your unemployment tax payment.

Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no income tax on wages. (New Hampshire and Tennessee do have a state income tax on dividends and interest, however.)