Tax and Account Reporting FAQ

Any payment in kind or similar advantage received from an individuals employing unit for personal services are covered for Wisconsin Unemployment Tax purposes. Wages include achievement awards, tips, deferred compensation and salary reduction arrangements and payments by corporations electing to be taxed as partnerships under subchapter S of the IRS code, that are reasonable compensation for services performed for the corporation.

Employers pay Unemployment taxes on each employee's wages up to the taxable wage base. You need to keep track of employee's wages for the year to determine at what point (quarter) the employee reaches the wage base plateau. The taxable wage base is $14,000. All wages after the taxable wage base has been reached are excludable wages and are reported on line 10 and subtracted from gross wages to determine taxable wages for the quarter (line 11). Example: when taxable wage base is $14,000: Employee earns $6,000 each quarter.

You should complete Form UCT-7842-E Contribution Adjustment Report. See the Handbook for Employers, Section 2 - Tax, Part 4 - Account Reporting, for more information. Adjustments can also be made online. Select "Adjust Previously Filed Tax and Wage Reports" under Employer Online Services on our website https://dwd.wisconsin.gov/uitax. Online access is required. You can request online access by selecting "Request Online Access to Your Account" located under Employer Online Services.

Your account balance is the accumulation of all taxes paid for prior quarters less any unemployment benefits chargeable against the account while the account was active. This account can only be used for payment of benefits to former employee's and remaining funds are not refundable to the employer. Conversely, if the account were overdrawn at the time of closure, we would not collect that deficit. The balance is maintained only for purposes of determining the employers annual tax rate.

Since one of the factors used to calculate your tax rate is the account balance, benefit charges decreasing your account balance has a direct impact on your tax rate. The amount and duration of the benefits are important factors in determining how much of an impact they may have.

Generally, corporate officers are limited to 4 weeks of benefits depending on their percentage of ownership and/or relationship to owners of the business. Should the corporation cease operations due to economic inviability, the officer/owner may be eligible for unreduced benefits. Certain corporations can elect to exclude the wages of certain principal corporate officers by filing an election with Tax & Accounting by March 31st of the year affected. See Section Wis. Stat. 108.02(15) & 108.04 for disqualifications and limitations.

From the tax rate notice sent in October of each year, see section E the reserve percentage and section J the total rate. Find the minimum reserve percentage of the next lowest rate on the schedule provided on the reverse side of the form and multiply that reserve percentage by the fiscal year taxable payroll shown in section A. This will give you the balance necessary to get the next lowest rate. From that amount subtract the current account balance from section C and this number is the voluntary contribution necessary. Possible savings are calculated taking the difference between the two rates and multiplying by the fiscal payroll as shown. This will give you the gross savings and by subtracting the amount of payment to be made you will see the net savings in taxes. If you have online access, you can also compute a voluntary contribution online. Select "Voluntary Contribution Calculator" located under Employer Online Services on our website at https://dwd.wisconsin.gov/uitax.

Not all employers will benefit from the corporate officer exclusion. The FUTA (940) tax does not recognize Wisconsin's exclusion so since state UI taxes are not paid on the officers wages, the employer is required to pay the FUTA tax on the officers wages at the full rate of 6.0%. Employers contemplating whether or not to exclude those wages should contact the department for an election form and a worksheet. The worksheet will help the employer determine possible savings or if the net effect would be an increase in total taxes.

The election form and worksheet are available at https://dwd.wisconsin.gov/uitax/forms-publications.htm.

Or contact us at:

Employer Service Team
P.O. Box 7942
Madison WI 53707
taxnet@dwd.wisconsin.gov
608-261-6700

See the Handbook for Employers Section 2 - Tax, Part 4 - Account Reporting.