Alabama Department of Labor

Your best source of information on a tax matter is your field tax service provider. Additional contacts are provided in this section which will also be helpful. Our Separation Information Employer Guide should be of assistance to all employers.

The following questions and answers provide a combination of general information and some technical information. This information should only be considered as a starting point due to the complexity of individual situations.

• How do I change my Employer Registration address?
• When is an individual considered an employee?
• How do you meet liability for Alabama State UC Taxes?
• What constitutes a successor employer?
• Are religious organizations liable for Unemployment Taxes?
• Are non-profit organizations exempt from Alabama Unemployment Tax?
• How does my business register as a new employer?
• What is the new account rate?
• How do I get my tax rate notice?
• May a tax rate transfer from an existing employer to a new employer?
• May an employer earn a tax rate based upon its record of unemployment experience?
• How is my annual tax rate calculated, if the rate is based on experience?
• How do benefit charges for unemployment compensation claims affect an employer's tax rating account?
• Are there non-charges and credits?
• How do temporary agencies seek relief of benefit charges for school services employees?
• How can I get help filling out my Quarterly Contribution and Wage report?
• What is the interest rate on past due contributions?
• What is the penalty rate for late reports?
• May I use a computer-generated Contribution and Wage Report?
• What is the taxable wage base?
• May I file one report for the whole year?
• How should I make wage corrections?
• How do I obtain a copy of previously submitted Quarterly Contribution and Wage Reports?
• What should I do to correct names or social security numbers already displayed on the online reports?
• Do I have to pay taxes if they are less than $1 (one dollar)?
• When is the last day I can file my Quarterly Contribution and Wage Report and not be late?
• Do I have to pay UC taxes on part-time employees?
• In sole proprietorships, are spouses and children under twenty one exempt from UC taxes?
• When in Chapter 11 Bankruptcy, am I expected to make quarterly reports and payment of UC taxes?
• Can our employees participate in a cafeteria plan and receive a reduction in reportable wages?
• Are wages paid to an employee by an Alabama employer for employment in another state useable in calculating the $8,000 taxable wages in Alabama?
• What is the Alabama New Hire program?
• What information about UC do I need for my employees?
• Are college students who work for class credit taxable?

Q. How do I change my Employer Registration address?

To change your address you must sign into E-gov and scroll down to Employer Registration/Account Status and click on Mailing Address. And follow the prompts. Click here to begin.

Q. When is an individual considered an employee?

An Alabama worker is an employee if an employee/employer relationship exists between the business and the worker. This means if a business has the “right of control” over the worker, whether or not, they actually exercise the right, the worker is an employee. Alabama law further provides that we use the common law factors to assist us in making determinations. Additionally, you may click here for some examples of independent contractors versus employees.

If you have further questions, you may contact your local field tax representative.

Q. How do you meet liability for Alabama State UC Taxes?

The Alabama UC law provides that, except for certain non-profit organizations and government entities, an employer becomes subject for taxes when any one of the following conditions are met:

1. Non-Farm Business Employers
   
   1. When the employer has had in employment one or more workers on some day in 20 or more different weeks, whether or not consecutive, during the current or preceding calendar year.
   2. Has paid wages of $1,500 or more in any calendar quarter during the current or preceding calendar year.
      
2. Household Domestic Employers
   
   1. Domestic employers become subject when the employer pays domestic workers in a private household, college club, fraternity or sorority house a total of $1,000 or more in cash wages in any calendar quarter during the current or preceding calendar year.
      
3. Agricultural Employers


1. When the employer has had in employment 10 or more agricultural workers in 20 or more different weeks during the current or preceding calendar year or
2. has paid a total of $20,000 in wages to agricultural workers during any calendar quarter of the current or preceding calendar year.

For additional information on establishing liability for Alabama Unemployment Taxes, contact the Status Unit as shown at the end of this section.

Q. What constitutes a successor employer?

An employer becomes subject by:

1. Acquiring the trade or business, organization, or substantially all the assets of another employer which at the time of such acquisition was an employer subject to Alabama Unemployment Tax.
2. Acquiring a segregable part of the organization, trade or business of another employer which was at the time of acquisition an employer subject to Alabama Unemployment taxes provided that the segregable part would itself have been an employing unit subject to Alabama Unemployment Tax had it represented the entire business of the predecessor.

For additional information regarding successor employers, contact the Status Unit as shown at the end of this section.

Q. Are religious organizations liable for Unemployment Taxes?

The Alabama UC law provides that services performed in the employ of a church or convention or association of churches; or an organization that is operated primarily for religious purposes and which is operated, supervised, controlled or principally supported by a church or convention or association of churches shall not be considered covered employment. For more information on religious organizations contact the Status Unit as shown at the end of this section.

Q. Are non-profit organizations exempt from Alabama Unemployment Tax?

Non-profit Organizations are liable for Alabama Unemployment Tax unless they are exempt from income tax under section 501(a) of the Internal Revenue Code and are classified as a Section 501(c)(3) exemption organization. Non-profit organizations that are classified under Section 501(c)(3) become liable for Alabama Unemployment Taxes only after they have had 4 or more individuals in employment in each of 20 different weeks within either the current or preceding calendar year. For additional information on Non-profit Organizations contact the Status Unit as shown at the end of this section.

Q. How does my business register as a new employer?

You can open an Alabama Unemployment Tax account by completing an application (Form SR-2*). Employers should submit an application as soon as liability has been established. To print an application form,  click here* or you can request an application form from the Status Unit as shown below.

You may contact the Status Unit at the telephone number and address shown at the end of this section if you have questions.

Status Unit
649 Monroe Street, Room 4201
Montgomery, AL 36131

Phone: (334) 954-4730
FAX: (334) 954-4731

Q. How do I get my new tax rate notice?

You may download your tax rate notice by logging into eGov, provided your company is not a new company with a 2.70% rate (initial rate). Employer who have a 2.70% rate will be able to download a computer generated tax rate notice once their individualized tax rate is determined for them.

Q. What is the new account rate?

Employers newly liable under the Alabama UC law pay tax at the rate of 2.70% on the first $8,000 of wages for each employee. Subsequent rates are determined by Experience Rating. You may contact the Experience Rating Section at the telephone number and address shown at the end of this section if you have other questions.

Q. May a tax rate transfer from an existing employer to a new employer?

A new employer that acquires the organization, trade, or business of another liable employer (the predecessor) is assigned the experience (benefit charges and taxable payroll) of the predecessor. The predecessor's experience is used to determine the successor's tax rate. If proper notification and wage transcripts are provided to the Alabama Department of Labor within the time prescribed by the Alabama UC law, the new employer may be entitled to a rate based on partial acquisition of the predecessor. You may contact the Experience Rating Section at the telephone number and address shown at the end of this section if you have other questions.

Q. May an employer earn a tax rate based upon its record of unemployment experience?

An employer which has operated a sufficient period of time to qualify for experience rating earns a tax rate based upon the employer's own experience (benefit charges and taxable payroll), modified by statewide experience (schedule and shared cost). Inclusive of the 0.06% Employment Security Enhancement Assessment (ESA), an Employer's rate can vary from 0.20% to 6.80% depending on the one of four rate schedules in effect, plus any applicable shared cost. Refer to the tax rate calculation information below for tax terms defined such as tax rate schedule, shared cost and ESA. You may contact the Experience Rating Section at the telephone number and address shown at the end of this section if you have other questions.

Q. How is my annual tax rate calculated, if the rate is based on experience?

The rate is computed using the three most recent complete fiscal years of benefit charges and taxable payroll. A fiscal year begins July 1st and ends the following June 30th.

Benefit charges (Item 9 on the Tax Rate Notice, Form UC-216) are costs for actual benefits paid to former employee(s). Taxable payrolls (Item 10) include taxable wages upon which taxes have been paid by the preceding July 31st. Your benefit ratio (Item 11) is determined by dividing total benefit charges (Item 12) by total taxable payroll (Item 13) for the three most recent complete fiscal years.

With knowledge of your benefit ratio (Item 11) and statewide schedule (Item 3), you can verify the computed rate (Item 5) and tax rate (Item 6) in the Tax Rate Table. An excerpt of the Tax Rate Table contained in Section 25-4-54(f) of the Alabama Unemployment Compensation (UC) Law is listed below.

The statewide schedule (Item 3) and shared cost (Item 4) are determined in accordance with 1989 amendment to the Alabama Unemployment Compensation Law. The amendment contains four rate schedules: A, B, C, and D. The applicable schedule is determined yearly by a formula that looks at the relationship of the Unemployment Compensations Trust Fund's balance to the desired level of the Fund. Shared cost (Item 4) is determined yearly and is defined as cost that cannot be assigned to a specific employer. Shared cost (Item 4) is added to the computed rate (Item 5) to determine the tax rate (Item 6). Employment Security Enhancement (ESA – Item 7) monies are deposited to the Employment Security Enhancement Fund in the State Treasury and used to assist unemployed claimants in obtaining employment.

To verify the tax rate (Item 6), find the line and benefit ratio range which corresponds with your benefit ratio (Item 11) on the Tax Rate Notice. Follow across to the applicable tax rate schedule (Item 3) given below to determine your rate. If your benefit ratio is 0.37%, your rate under Schedule C is 0.50%. All rates must be reduced by 0.06% ESA except 5.40%. After the 0.06% reduction, the rate will agree with the computed rate (Item 5) on the Tax Rate Notice. The computed rate would be 0.44% for this example. Add shared cost (Item 4) to the computed rate (Item 5) to determine the tax rate (Item 6) on the Tax Rate Notice. Your rate (Item 6) and ESA (Item 7) may be combined to determine your total rate at which payment is computed quarterly.

To view general information about the tax rate system, you may download the current publication of the "Employer Handbook". The complete tax rate schedule, Tax Rate Table and shared cost from the UC law may be viewed online at http://alisdb.legislature.state.al.us/acas/CodeOfAlabama/1975/25-4-54.htm. You may contact the Experience Rating Section at the telephone numbers and address shown at the end of his section, if you have more questions.

Q. How do benefit charges for unemployment compensation claims affect an employer's tax rating account?

When an individual files a claim for benefits, two determinations are made. The first is a monetary determination of the amount of benefits the claimant may receive based on his/her wages paid in a specified time period (base period). The second is a non monetary determination that considers the claimant's eligibility for benefits and reason for separation from employment. Both determinations affect the charging of the employer's account.

The gross wages paid to a claimant by all employers in the base period are used in determining a claimant's weekly benefit amount (WBA) and maximum benefit amount (MBA). An employer's charging for benefits is based on the following elements.

1. Base Period Gross Wages Paid by the Employer - The base period is defined in Alabama's UC law as the first four of the last five completed calendar quarters prior to the filing of the claim, and is used to establish eligibility for benefits.
   
2. Cost Ratio (Percentage) - If a claimant has only one employer in the base period, that employer's account would be charged for 100% of the cost for benefits paid and chargeable. If the claimant had two or more employers during the base period, each employer's liability would be determined by its percentage of the total gross wages paid by all base period employers.
   
   The percentage, times the total amount of benefits ultimately received by the claimant while unemployed, equal the employer's benefit charges. After the end of each quarter an employer receiving benefit charges during the quarter is mailed a statement of the benefit charges. Benefits charged to the employer's account may increase the employer' tax rate and result in higher tax payments that will enable the Trust Fund to recover the benefits paid over a three year period. You may contact the Experience Rating Section at the telephone number and address shown at the end of this section if you have other questions.

Q. Are there non-charges and credits?

Provisions of the Alabama UC law allow tax rated employers to receive relief from benefit charges and immediate credits for overpaid benefits. In order to receive consideration of non-charging, the employer must timely respond to the separation, determination, and/or charge notices.

Non-charging may not affect entitlement or eligibility. The claimant, if eligible and qualified, may still collect benefits. The list below indicates reasons for non-charging and credit;

1. Voluntarily quit without good cause connected with the work. Tax rated employer is relieved of all (100%) benefit charges based on the period of employment ending with such separation.
   
2. Discharged for dishonest or criminal act, sabotage, or an act endangering safety of others. Must be in connection with work. Effective with separations after July 3, 1994, use of illegal drugs, refusal to take a drug test, or altering a drug test if:
   
1. The employer has a reasonable drug policy:


2. The drug test meets Department of Transportation or other reliable standards;


3. The employee has been advised of the drug policy in writing.

Tax rated employer relieved of all (100%) benefit charges. As application of a disqualification in this category involves removal of base period wages from the claim, reimbursing employers accounts are credited as the claimant repays the benefits for the overpaid weeks the claimant is disqualified.

3. Discharged for actual or threatened misconduct in connection with work after previous warning. Tax rated employer relieved of all (100%) benefit charges.
4. Discharged for misconduct connected with work with no warning other than the acts mentioned above. Tax rated employer relieved of one-half (50%) benefit charges.
5. Continues to work part-time with similar wages and hours as those in base period. Tax rated employer relieved of all (100%) Benefit charges.
6. If the claimant is originally granted and paid benefits, but as a result of a redetermination or an appeal is later disqualified, a credit will be immediately given, except to reimbursing employers, for benefits paid prior to the redetermination or appeal decision. Credits will only be given to reimbursing employers when the claimant repays any benefits improperly paid. Subsequent benefits will only be charged if the claimant resolves the disqualification and the benefits are otherwise payable.

You may contact the Experience Rating Section at the telephone number and address shown at the end of this section if you have questions.

Experience Rating Section
649 Monroe Street, Room 4215
Montgomery, AL 36131-4200

Phone: (334) 954-4741
FAX: (334) 242-2068

Q. How do temporary agencies seek relief of benefit charges for school services employees?

Following passage of HB71 , a temporary agency company seeking relief of benefit charges for school services employees must file an affidavit with the Alabama Department of Labor. Relief of benefit charges will only be considered if 75% or more of the temporary agency’s employees are employed within a school system. To file an affidavit, please click here. For questions concerning your affidavit, call 334-954-4730. You may mail the notarized original to Department of Labor, Status Unit, Room 4201, 649 Monroe Street, Montgomery, AL 36131.

Q. How can I get help filling out my Quarterly Contribution and Wage report?

Contact your local field tax representative.

Q. What is the interest rate on past due contributions?

One percent (1%) per month on contributions due until paid.

Q. What is the penalty rate for late reports?

On quarters prior to January 1, 1996, the penalty is $5.00 per report due. Beginning with first quarter 1996, the penalty is $25 or 10% of taxes owed, whichever is greater.

Q. May I use a computer-generated Contribution and Wage Report?

No. Quarterly reports must be filed online via eGov at our website http://labor.alabama.gov.

Q. What is the taxable wage base?

The employer is taxed on the first $8,000 paid by the employer to the worker during the calendar year.

Q. May I file one report for the whole year?

No. The Quarterly Contribution and Wage Report must be filed online for each quarter.

Q. How should I make wage corrections?

Submit a completed UC-10-C (Statement to Correct Information) form online via eGov at our website http://labor.alabama.gov.

Q. How do I obtain a copy of previously submitted Quarterly Contribution and Wage Reports?

For reports filed online, go to our website http://labor.alabama.gov., hover over the Online Services tab and then click the “Login to eGov” link or click on the “BUSINESS EMPLOYERS” image, click on eGov and login using the login and password you created. Click "Quarterly Reporting/EFT" link, then click "Wage and Tax Reporting (Handkey)" or "Wage and Tax Reporting (upload)" link, whichever is appropriate to your method of filing. Enter your UC Account number and Federal identification number and click Submit. Click "Continue" thru the two informational screens. From "Reporting Options" page, click "View/Reset Previously Entered Wage Reports" link, then click on "View Report" link next to the year/quarter report you wish to view and/or print - this will open in a new window; print the report and exit/close the page.

For other reports, call, write or fax your request to the Audit & Cashiering Section at the address below.

Q. What should I do to correct names or social security numbers already displayed on the online reports?

When filing the report online, check the "delete" box next to the line containing the incorrect name or social security number. Click on "Add New Employee" and input the correct information including name, SSN, etc. To correct previously submitted reports, submit Form UC-10-C online.

Alabama Department of Labor
649 Monroe Street, Room 4207
Montgomery, AL 36131

Phone: (334) 954-4701
FAX: (334) 954-4703

Q. Do I have to pay taxes if they are less than $1 (one dollar)?

Yes. All taxes due are payable.

Q. When is the last day I can file my Quarterly Contribution and Wage Report and not be late?

Contribution and Wage Reports are due the last day of the month following the end of the quarter (January 31, April 30, July 31, and October 31.)

Q. Do I have to pay UC taxes on part-time employees?

Yes.

Q. In sole proprietorships, are spouses and children under twenty one exempt from UC taxes?

Yes.

Q. When in Chapter 11 Bankruptcy, am I expected to make quarterly reports and payment of UC taxes?

Yes, you are required to report quarterly and pay post-petition taxes - those taxes that accrue following the filing of Chapter 11.

Q. Can our employees participate in a cafeteria plan and receive a reduction in reportable wages?

If the employee has the option of the benefit or receiving cash, it is reportable for Alabama UC purposes.

Q. Are wages paid to an employee by an Alabama employer for employment in another state useable in calculating the $8,000 taxable wages in Alabama?

Yes.

Q. What is the Alabama New-Hire program?

This is a registry for reporting newly hired employees, recalled workers, and job refusals. Its purpose is to combat fraud and keep employer tax rates from rising. For more information call the New-Hire Unit at (334) 206-6020 or FAX (334) 242-8956. Or you can visit their web site at: http://labor.alabama.gov/nh.

Q. What information about UC do I need for my employees?

Employers are required to display the posters for Alabama Child Labor Law, Worker's Compensation Notice and Your Job Insurance.These posters and others can be downloaded online at: https://labor.alabama.gov/docs/doc_type.aspx.

Q. Are college students who work for class credit taxable?

No. If the student works for class credit, as an intern or teacher's assistant, those wages are not reportable or taxable provided enrollment in college is a requirement for employment.