Employers Covered Under the Law

Determining Your Liability

A liable employer is an employing unit that is required to report wages and pay Unemployment Insurance (UI) contributions to Iowa Workforce Development (IWD) UI Division. There are four classifications of liable employers:

  1. amount of wages paid, number of weeks worked or business type
  2. federal liability
  3. successorship
  4. elective coverage

Information regarding these classifications is provided in more detail below.  Part-time, seasonal or temporary employees are counted the same as full-time employees.

Note: Officers of a corporation are included as employees if they perform services.

Amount of Wages Paid, Number or Weeks Worked or Business Type

Your employing unit becomes liable if it meets any of the following criteria.  Liability is retroactive to the first quarter wages were paid.

Payroll of $1,500.00

  • paid gross wages of $1,500.00 or more in any calendar quarter for covered services
    Note:  Beginning January 1, 2019, employers will be liable when any wages are paid.

Number Of Weeks Worked

  • one or more employees are performing covered services for any portion of a day in at least 20 different calendar weeks
    • the 20 calendar weeks do not need to be consecutive
    • the same workers do not need to be employed each week
  • employees in all establishments operated by the same employing unit must be included in the count

Agricultural Laborers

  • paid gross wages of $20,000.00 or more to agricultural laborers in any quarter of the current or previous calendar year
  • employed 10 or more employees in some portion of a day in 20 separate weeks in the current or previous calendar year

Domestic Employees

  • paid wages of $1,000.00 or more to domestic employees during any calendar quarter in the current or previous calendar year

Non-Profit Organizations - 501(c)(3)

  • religious, charitable, scientific, literary, educational, or organizations working for the prevention of cruelty to children or animals
  • a total payroll of $1,500.00 or more in any calendar quarter for covered services or have one (or more) employees performing covered services in some portion of a day in at least 20 different calendar weeks
  • may request a reimbursable status to reimburse the Iowa UI Trust Fund for any UI benefits paid rather than paying a contribution into the Fund (this status remains in effect a minimum of 2 years)
  • you must have a 501(c)(3) Internal Revenue Service tax exempt letter to request a reimbursable status
  • refer to section 96.7.8 of the Iowa Code for additional information about reimbursable status

Government Entities

  • cities, counties, school districts, townships and community college districts are required to reimburse IWD for any UI benefits paid
  • these entities can elect to pay contributions if the election is made within the time specified by law
     

Federal Liability

If an employing unit is liable for taxes under the Federal Unemployment Tax Act (FUTA) and is liable in another state for unemployment insurance contributions, the employing unit is liable in Iowa once wages are paid

Successorship

  • you become liable for UI contributions on the date you acquire all or part of another existing employer’s business that is liable prior to the acquisition
  • it is the buyer's responsibility to obtain information regarding the UI contribution rate, debt and future benefit charges, as all or part of the account experience may be transferred to the acquiring employer's UI account
  • after acquiring a business, you should make a formal and specific offer of work to each employee of the former owner you wish to retain
  • the offer should outline duties, pay rate, work days and work shift
  • please report any refusals by completing the Notice of Separation or Refusal of Work web form
  • if the seller fails to disclose information to the purchasing employer about UI benefits charged to their account, they are liable for actual damages and attorney fees to the acquiring employer

Elective Coverage

  • an employing unit that does not meet UI liability may elect to become liable
  • this allows your employees to be covered under the Iowa Employment Security Law and receive UI benefits, if eligible
  • you become liable for contributions based on the effective date in the application
  • the election is valid for a minimum of two years
    • you may cancel by submitting your request in writing by February 15th following the year in which you wish to end your election
  • please complete and file the Voluntary Election to Become an Employer form for elective coverage
  • IWD’s UI Division will review the form and determine if you qualify

Excluded Services and Wages

Common exclusions when counting employees and determining if the wages are reportable include:

  • individual owner of a business (sole proprietor)
  • partners of a partnership
  • limited liability members are excluded if paid in proportion to ownership interest
  • family employment
    • father or mother working for a son or daughter
    • husband or wife working for his or her spouse
    • children under 18 years of age employed by a father or mother
    • the exclusions can apply to a partnership if an exempt family relationship exists between the employee and each of the partners

Note:  Family employment exclusions apply to an individually owned business and not to a corporation or a limited liability company.

  • sick or disability pay if payments are made under an employer plan that applies to its employees generally or to a class of employees
  • services when employed by a school, college, or university by a student who is enrolled and regularly attending classes, and/or services performed by the student’s spouse hired under a program to provide financial assistance (the spouse is advised of the fact at the time of hire)
  • services performed by a student for an employer as a formal and accredited part of the curriculum of the school
  • services when employed by a church, convention or association of churches, or organization which is operated, supervised, controlled, or principally supported by a church, convention or association of churches, which is operated primarily for religious purposes (example: the service of a janitor in a church is excluded, but the service of a janitor for a separately incorporated college which is not operated primarily for religious purposes, although it may be church related, is covered employment)
    • services performed by ministers and by members of religious orders (in the exercise of their ministry) in performing the duties required by their orders
       

Employer Audits

The United States Department of Labor requires Iowa Workforce Development (IWD) to perform an Unemployment Insurance (UI) tax account audit on a percentage of Iowa employers each year.  The audits are conducted to ensure compliance with the provisions of Iowa Code, Section 96.11.6(a) and Iowa Administrative Code 871, Chapter 22.17(4).  This requirement results in several thousand Iowa employers being selected for a UI tax account audit each year.

Businesses with or without an active UI account may be selected for an audit to determine if they are a liable employer.  Under Iowa law employers are required to provide records for examination as defined in Iowa Administrative Code 871 Chapter 22.17(2).  

Field auditors are assigned to specific territories throughout Iowa. Territories are assigned based on mailing address ZIP code on the employers' account. Employers can contact the field auditor assigned to their account for any questions. 

Misclassification of Workers

It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.

Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.

Intentional misclassification constitutes tax and insurance evasion. Employers misclassifying their workers may face the following consequences:

  • penalties and fines
  • interest on back taxes
  • criminal charges under various laws​

 For more information or to report suspected misclassification of workers, go to www.iowaworkforcedevelopment.gov/misclassification-workers-iowa.

Appealing Your Unemployment Tax Decision

Employers who do not agree with a UI tax decision may file an appeal and present testimony and documents to an administrative law judge.  The appeal must be submitted in writing and filed within 30 days of the decision date.  The decision will be final if you do not file an appeal.  Your appeal must be in writing and mailed, emailed or faxed to:

Iowa Workforce Development
Unemployment Insurance Tax Bureau
1000 East Grand Ave.
​Des Moines IA 50319-0209

Email: iwd.uitax@iwd.iowa.gov

Fax: 515-242-5247

The appeal must also include:

  • company name, address and Iowa UI account number
  • decision date
  • a statement that you are asking for an appeal
  • your reason for appealing

You must report your employees' wages on a quarterly basis.  If your appeal is on time, payment of the computed contribution is not an agreement to the amount owed.  If you lose your appeal, you may request a waiver of interest.

Once the appeal is scheduled, you will receive further communication from the Division of Administrative Appeals including an appeal packet, date and time of appeal and instructions for participation.