UC Tax Overview
Unemployment Compensation (UC) protects workers who experience job loss by providing temporary income support to people who become unemployed through no fault of their own. UC Benefits are paid, for a limited time, to individuals who are able and available for suitable work and are actively seeking new employment. To qualify for UC benefits, a worker must have performed services covered under the Pennsylvania UC Law (Law), and must have worked for an employer who is required by Law or elects to pay into the UC Fund.
Employer contributions (in the form of quarterly tax payments) are the primary funding source for UC benefit payments. An employee withholding tax is a secondary funding source. The costs of UC program administration are defrayed by federal employer taxes collected under the Federal Unemployment Tax Act (FUTA).
Businesses that provide employment covered under the Pennsylvania (PA) UC Law provisions must register with the Commonwealth for UC coverage. Act 5 of 2005 provides for civil and criminal penalties for employers who willfully fail or refuse to file a required registration document with the Department. For additional registration information, please refer to the "Registration" page.
Financing UC Coverage
If employment is covered under the Pennsylvania UC Law, employers are responsible for UC coverage of their employees. Most employers use the Contributory financing method. However, political subdivisions and certain nonprofit employers have a choice of two methods of financing this coverage. These are:
Contributory - employers pay contributions based on a taxable wage base paid annually to each employee, or
Reimbursable - employers may elect, if qualified, to reimburse the UC Fund for the amount of benefits chargeable to their account on a dollar-for-dollar basis. For additional information, see the Reimbursable Employers page.
Contribution Tax Rates
Every calendar year, each active employer's contribution tax rate is computed. Each employer is mailed a contribution rate notice containing the rate assigned for that calendar year. If an employer disagrees with the information on the rate notice, an appeal may be filed within 90 days of the date of the contribution rate notice.
UC quarterly tax reports must be filed electronically in the UC Management System (UCMS) at www.uctax.pa.gov. The employer is responsible for reporting wages paid to employees and remitting any resulting contributions based on those wages. Legal action may be pursued if an employer does not file the required information and/or remit any resulting contributions. Changes to previously filed reports can be made by selecting the "Amend Quarterly Report" option in the Quarterly Reporting section of UCMS. If no wages are paid for a quarter, a "none" report must be filed. Learn more about why UC reports are crucial here.
The UC Law specifically provides that an employer's books and records may be audited by the Department. An employer, whether or not liable for UC, must maintain the following records and, when necessary for review, make these records available to the Department:
employment and payroll records
Employers who cease paying wages in Pennsylvania should promptly inactivate their UC Tax account by accessing the Employer-Profile portal in UCMS and selecting "Close Account" on the "Profile Maintenance" screen.