For business owners with employees, unemployment taxes, as well as employees’ eligibility for unemployment, is an important part of operations. Understanding unemployment taxes, as well as some of the changes that have occurred as a result of the COVID-19 pandemic and passage of the CARES Act, will help ensure you can continue protecting your employees while achieving your business goals and objectives.
Unemployment Taxes
Unemployment taxes are a form of payroll tax that employers pay. They are taken at the state and federal level. At the federal level, unemployment tax is a percentage of an employee’s wages based on the number of wages. The first $7,000 is taxed at 6%. However, employers can get a tax credit on this tax by paying state unemployment taxes on time and in full. Except for Alaska, Pennsylvania, and New Jersey, employers also pay the state unemployment tax.
The Impact of the CARES Act
The CARES Act was put in place as a direct result of the COVID-19 pandemic. The CARES Act expands unemployment benefits for employees who file due to COVID-19. Along with federal supplementation of $600 a week in unemployment in addition to state unemployment, the following expansions have taken effect in this act:
- Part-time workers are eligibleÂ
- Independent contractors, gig workers, and self-employed individuals are eligibleÂ
- Those who cannot work due to COVID-19, such as in the care of a family member or due to closed child care/school, are eligibleÂ
- Small business owners are eligible Â
There are other changes that have taken place as a result of the CARES Act. It is important for employers to research the law so they are aware of how this impacts them. Though the current COVID-19 pandemic has changed the economy dramatically, unemployment taxes are still in place to protect employees. The more you know about unemployment in the current economic environment, the easier it will be to continue your business and achieve goals.
