Glossary of Unemployment Tax Terms
501(c)(3): Is a nonprofit organization. To qualify as a 501(c)(3) an employer must have these five atributes:
- Be a corporation or similar entity (or trust).
- Be operated exclusively for charitable purpose.
- Not give any benefits or money to shareholders or any individual.
- Not have a substantial part of its activities be attempting to influence legislation.
- Not participate in (at all) a political compaign for a public office.
ABC Test: Until June 10, 2011, the ABC Test was in place to determine the existence of an employment relationship. From June 10, 2011, until December 31, 2012, the ABC Test was modified to be the A+B or A+C Test. Under this variation, the employing unit had to meet prong A so as to show that it had no control over the worker(s) in question, and then the employing unit had to meet either Prong B or Prong C.
As of December 31, 2012, a new Employment Standard went into effect. The new standard replaces the "ABC Test" as well as the “A+B or A+C Test” and establishes a common "employment" definition for workers' compensation, unemployment insurance and wage and hour coverage.
Acquisition: Something that has recently been bought or obtained.
Agricultural Labor: Agricultural labor generally refers to services performed on a farm for an employing unit that is connected to cultivating soil or raising or harvesting any agricultural, aquacultural or horticultural commodity. This includes tending to livestock, bees, poultry, and other animals. Types of farms acceptable in this definition are stock, dairy, poultry, fruit, fur-bearing animals, truck farms, plantations, ranches, nurseries, ranges, greenhouses, orchards and similar structures.
Annual taxable wages: Annual taxable wages are the amounts of wages on which an employer pays unemployment contributions in a calendar year.
Audit Program: As part of the Maine Department of Labor’s Quality Control program, a minimum of 2 percent of Maine’s employers are selected for audit each year. The audit is performed to ensure proper reporting of wages over a single calendar year. Other reasons for audits include new employer status, large increases/decreases in employment, or industry examinations.
Average Employer Rate: This is the rate assigned all new employers upon receiving an employer account number. After two full rating periods (a minimum of 30 months), the employer will be eligible for the experience rate.
Calendar Quarter: The calendar quarter is the time period wherein an employer become liable if wages are paid to any worker totaling more than $1,500 or for 20 weeks of employment. Calendar quarters are also important for wage reporting, such as the "Quarterly Wage Report" (form 941C1-ME). The four calendar quarters are noted as January through March (1/1 to 3/31), April through June (4/1 to 6/30), July through September (7/1 to 9/30), and October through December (10/1 to 12/31).
Combined Quarterly Reports (CQR): Tax payments on reportable wages in a calendar quarter are due on or before the last day of the month following the quarter close on a "Combined Quarterly Report" (Form 941C1-ME).
Competitive Skills Scholarship Fund (CSSF): In 2007, the 123rd Legislature enacted legislation creating a program entitled the Competitive Skills Scholarship Fund Program (CSSF). This program has been created to address the serious and growing skills gap between the existing skills of today's workforce and the skill needs of tomorrow's jobs. This program will provide workers with the skills they need to successfully perform in the good jobs that are being created in our economy and help businesses find the qualified workforce needed to foster innovation and stay competitive in the global marketplace. Approximately $3 million will be collected each year for the CSSF that will then be available to assist workers earning below 200% of poverty to obtain a degree or certificate in a training program for jobs in high-growth industries. It will pay for tuition and fees that are not paid from other sources (including federal financial aid); and will fund educational supports for workers in training including childcare, transportation, books, supplies, equipment, and remedial and prerequisite training.
Contribution: Used interchangeably with "tax."
Direct Reimbursement Employer: Governmental entities and 501(C)(3) nonprofit organizations can chose to make reimbursement payments to the Bureau of Unemployment Compensation (BUC) instead of making regular contributions paid by taxes. To sign up for direct reimbursement status, the employer must file a written request within 30 days of its subject status determination. Changing the payment method should occur within 60 days prior to the beginning of the year of the change.
Employer Account Number: New employers are issued account numbers when they have met liability by filing an application or submitting a quarterly report. The account number is used to process all of the employer’s reports and payments.
Employer/Employing Unit: Under the law "employer" and "employing unit" are considered the same. An employer is any business or individual that pays an individual for services. Employers can take many of the forms listed below:
- Governmental - federal, state, county and municipal;
- Limited Liability - individuals, partnerships, corporations; Individuals - estates and trusts,
- Partnerships - firms, associations, trusts, joint ventures;
- Corporations - public, private, foreign, domestic, c-corp and s-corp.
Employment: Employment is the entire service of an individual performed for some kind of wage, under any type of contract. The law presumes that a worker’s services are employment unless the employer can prove that the worker’s services are exempt. A three-part test determines whether a worker’s services should be considered covered employment (see ABC Test above).
The Employment Standard: Maine law (26 M.R.S.A., Chapter 13, 1043, 11, E) establishes the standards used by the Maine Department of Labor and the Maine Workers' Compensation Board to determine which workers are independent contractors by defining a common "employment" definition for workers' compensation, unemployment insurance and wage & hour coverage. This employment standard replaces the multiple tests previously used by these agencies. State and federal law, not contractual agreements, determine which workers can be classified as independent contractors.
Excess Contributions: A relevant factor of how an employer’s experience rate is determined, "excess" is defined as the difference when the amount of contributions charged to the employer’s account is subtracted from the amount of contributions the employer made to the account.
Excess Wages: Any wages paid in excess of the State’s taxable wage base.
Experience Rate: Employers are eligible for the experience rate after the new account has been set up and the employer has been assigned the average employer rate. The employer’s experience rate is determined through multiple factors over time. The rate may be higher or lower than the average employer rate. The rate reflects an employer’s history of average taxable wages, contributions paid, and benefits charged.
Fraud: The crime of obtaining money or some other benefit by deliberate deception.
FUTA: Federal Unemployment Tax (FUTA) is one of two taxes generally paid by employers, that finances the administrative costs of unemployment insurance.
Liability: In general, an employer becomes liable when he or she pays workers $1,500 or more in gross wages in a calendar quarter or for work performed in any part of the day in 20 weeks in the calendar year. This encompasses most employers. An employer is determined to be liable under
26 M.R.S.A. Chapter 13. section 1043 (9)(A)(1-10).
Reasonable Compensation to S Corp Officers: S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee. The amount of reasonable compensation will never exceed the amount received by the shareholder either directly or indirectly. The instructions to the Form 1120S, U.S. Income Tax Return for an S Corporation, state "Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation." Several court cases support the authority of the IRS to reclassify other forms of payments to a shareholder-employee as a wage expense which are subject to employment taxes.
Remuneration: Payment for services
Reserve Ratio: The total excess wages on a date divided by the average taxable wages, shown as a percentage.
Seasonal Employment: Work performed in an industry designated as seasonal during the time period determined by the Unemployment Insurance Commission. See also Table of Seasonal Industries (Me. FX-33) and Seasonal Industries and Unemployment Benefits (Me. I-17) .
Subject Employer: An employer who is liable to pay Unemployment Compensation Tax.
Successor Employers: Successor employers are those that have acquired in whole or in part a previous liable employer’s business, including-certain uncollectible obligations.
Successor Employer (Acquisition in Toto): An individual or employing unit who acquires a majority of the assets from the organization, trade or business. Successors immediately become liable for coverage, and inherit the experience rate and benefit charges of their predecessors. Successor employers may be held responsible for unpaid tax liabilities.
SUTA: State Unemployment Tax (SUTA), is a required tax paid by employers regardless of federal liability, which finances benefits disbursed from the Unemployment Insurance Fund.
Unemployment Insurance Commission: This body, comprised of three members representing employers, labor, and the general public hears employer appeals. A decision is rendered, and the employer may appeal within 10 days. The Commission members are appointed by the Governor and approved by the State Senate for a term of six years.
Voluntary Contribution: Voluntary contributions may be made in addition to regular contributions within 30 days of a contribution rate notice. After voluntary contributions are made, the employer’s rate is recalculated to show the additional payment. Voluntary contributions can help an employer improve its contribution rate. A new employer with the average employer rate may not elect to make voluntary contributions.
Voluntary Election: With permission from the Commissioner of Labor, an exempt employer may choose voluntarily to be covered by unemploymentinsurance. If an exempt employer is allowed to be covered voluntarily, it must make contributions for a minimum of two years.
Wages: This term refers to all remuneration for personal services, specifically, it includes commissions, bonuses, severance or terminal pay, gratuities, and the cash value of other forms of payment, such as room and board. Vacation and holiday pay, as well as compensation paid to corporate officers outside of stock ownership are also included.