The Social Security Act of 1935 established the Federal-State Unemployment Compensation Program.
North Carolina's unemployment insurance program provides unemployed workers with temporary benefits while they are looking for other work. Employers pay taxes through the State Unemployment Tax Act to fund the state program. Based on Chapter 96 of the North Carolina General Statutes or the Employment Security Law and the Social Security Act of 1935, the state collects quarterly taxes from employers.
North Carolina State Unemployment Tax Act
Each state collects unemployment taxes from employers who conduct business within the state's boundaries. The North Carolina State Unemployment Tax Act requires employers to contribute to the state's unemployment insurance program. Employers pay taxes based upon their total payroll earnings and based on an "experience rating system." Initially, the Employment Security Law of the North Carolina General Statutes requires the state to assess unemployment taxes at a standard rate determined by the North Carolina legislature. After two tax years, the state replaces the standard tax rate with the experience rating.
Tax Rates
The North Carolina Department of Revenue imposes unemployment taxes on employers at tax rates depending on an employer's payroll earnings, taxes paid and unemployment insurance taxes paid. Employers have appellate rights to contest their tax ratings. They must file written appeals postmarked by May 1 of the year taxes are due. Employers who pay their unemployment taxes in a timely manner receive a credit offsetting their Federal Unemployment Taxes. Employers can receive a 5.4 percent credit on their federal employment taxes, and they remit the remaining amount to the Internal Revenue Service.
Liable Employers
Under the North Carolina State Unemployment Tax Act, employers who have at least one employee working 20 weeks during any calendar year or paid at least $1,500 in wages is responsible for paying North Carolina unemployment taxes. Successor companies who acquire companies that paid unemployment taxes must also pay unemployment taxes upon acquisition. Employers who are required to pay federal unemployment taxes must also pay taxes to fund the North Carolina unemployment system.
Other Types of Employers
Non-profit charities and organizations must pay unemployment taxes in North Carolina if they have at least four employees who each work at least 20 weeks. Agricultural employers must pay unemployment taxes if they have at least 10 employees who work 20 weeks or more or pay gross wages of at least $20,000 in any quarter. Domestic employers who pay at least $1,000 in wages must pay unemployment taxes. North Carolina requires state and local governments to contribute, and Indian Tribes and temporary employment agencies must contribute as well.
Considerations
Since tax laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your jurisdiction.
Tags: North Carolina, unemployment taxes, State Unemployment, Carolina State, Carolina State Unemployment
