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November 23, 2014
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Employer Guide

IF MORE IS PAID OUT IN BENEFITS THAN I HAVE PAID IN, DO I HAVE TO PAY THE DIFFERENCE?

Not directly. However, this will result in a deficit balance in your employer reserve account that will cause your tax rate to increase.

WHAT WILL MY TAX RATE BE IF I START A CONSTRUCTION BUSINESS?

A new employer who is determined to be in the contract construction business is assigned the MAXIMUM TAX RATE in effect for the year in which he becomes liable, ranging from 9.0% to 10.0%. If you are a new construction employer, you will not be eligible for an experience rating less then the maximum rate until you have employed workers in Kentucky for at least 12 CONSECUTIVE CALENDAR QUARTERS preceding the computation date. (Your rate may go up or down during this period if the tax rate schedule in effect changes from year to year.) Once you have met the requirement, your rate for the following year will be based on your reserve ratio as described on previous pages.

WHAT IS A "VOLUNTARY CONTRIBUTION"?

In addition to the unemployment tax, which you are required to pay, you may make additional payments into your reserve account to reduce a deficit balance or to increase a positive balance. Since tax rates are based on reserve account balance, changing your balance can lower your next year’s tax rate. Sometimes a relatively small voluntary payment will lower your tax rate and allow you to save a larger amount of money in the coming year.

Paying off a deficit balance is the most common form of voluntary contribution, since this will result in the greatest reduction in tax rate and, therefore, the greatest tax savings. However, even positive balance employers may be able to save money by making voluntary payments.

HOW DO I MAKE A VOLUNTARY CONTRIBUTION?

Voluntary contributions are usually made at the time that annual notice of new year rates are issued. Your "Notice of Contribution Rate" contains instructions for determining whether a voluntary payment will reduce your tax rate for the new year. If so, you may make a payment within 20 days from the mailing date of the notice, and it will be credited to your account as of the preceding computation date and used to recalculate your current year rate. Make a copy of the rate notice, complete the voluntary contribution portion to indicate the amount of your payment and the intended new rate, and send it to the tax branch at the address on the notice. Include a check made payable to the "Treasurer, Kentucky Unemployment Insurance Fund." The check should be labeled as a "voluntary contribution" and must include your reserve account number (KEIN). The tax branch will check your payment to make sure it will reduce your rate as desired; if not, it will be returned to you.

You will not be allowed to make a voluntary contribution if you owe the division any tax, interest or penalty. You may pay off your delinquency and make a voluntary contribution at the same time, but only the amount of your voluntary payment over the amount of your delinquency will be used in recalculating your rate.

Construction employers who are subject to the maximum tax rate may make voluntary contributions to pay off a deficit balance. However, this will not affect your tax rate unless you have satisfied the minimum length of employment described in the construction rates section.

Voluntary contributions may also be made at any time of the year by sending a check made out as previously described to the Unemployment Tax Branch, P.O. Box 948, Frankfort, KY 40602. It should be accompanied by a brief explanatory letter. However, voluntary payments made at any time other than the 20 days after the issuance of rate notices will not affect your current year rate. They will be used in calculating your following year rate if made by the computation date (Oct. 31).

HOW DO I FIGURE A VOLUNTARY CONTRIBUTION. AND HOW CAN I TELL IF IT WILL SAVE ME MONEY?

You may first want to review the section on how rates are computed, since this will make it easier to understand how voluntary contributions are calculated.

Remember that rates are assigned based on your RESERVE RATIO, which is the percentage your reserve balance is of your three-year taxable payroll. You want to change the percentage in order to change your rate.



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