Unemployment Insurance
Unemployment Insurance Taxes
An employer's unemployment insurance tax liability is based on the taxable wage base, which is the first $10,000 of each worker's wages. If covered for the first time, the tax rate will be 1.7% of the wage base rate, plus an annually computed surtax and solvency surcharge. For calendar year 2006, the surtax is 0.22% and the solvency surcharge is 0.6%. After twelve months the employer is eligible for a computed rate.
A computed rate is based on a formula using the activity on the employer's account, which includes length of time as a taxable employer; taxable payroll reported; taxes paid into the UI Trust Fund; and benefits that are charged to the employer and paid out of the UI Trust Fund.
A percentage of excess is used to determine an employer's computed tax rate. Employers who have paid in more UI taxes to the UI Trust Fund and have paid out less in UI benefits are assigned a positive percent of excess. Employers who have paid in fewer taxes to the UI Trust Fund and have paid out more in UI benefits are assigned a negative percent of excess.
Employers with a positive percent of excess are assigned a lower computed tax rate, while employers with a negative percent of excess are assigned a higher computed tax rate.
NOTE: The percent of excess is computed by subtracting the benefits charged to an employer account from the taxes paid to that account and dividing the result by the average annual taxable payroll. The percentage is computed to the nearest one percent.
The computed rate ranges from 0.0% to 5.4%, depending on the factors mentioned above.
Specific information on the tax rate for a business can be obtained from the Colorado Department of Labor and Employment Unemployment Insurance Tax Branch at (303) 381-9100, or on the web www.coworkforce.com/UIT