What's New in UI Tax

Taxable Wage Base for 2024 (and 2023)
Mandatory Electronic Payments
Employee Misclassification (IRS Classification Settlement)
Alternate Base Period

Taxable Wage Base for 2024:

Effective January 1, 2024 the taxable wage base for calendar year 2024 is $40,600. (The taxable wage base for calendar year 2023 is $40,100). The taxable wage base for Unemployment Insurance (UI) contributions is calculated each year at 66 2/3 percent of the average annual wage paid to Nevada workers. UI taxes, payable to the Employment Security Division, are paid on an individual's wages up to the taxable wage base during a calendar year. Although total wages paid to each employee must be reported to the Division each quarter, any wages paid to an individual, which exceed that amount during the calendar year, are not taxed.

Mandatory Electronic Payments:

In accordance with NRS 353.1467, taxes due of $10,000 or more are required to be paid electronically. This mandate applies to authorized agents and submitters who file for multiple employers as well. If the total aggregate amount of contributions is $10,000 or more, Nevada law requires the payment to be made electronically by either ACH Credit or ACH Debit. Electronic Payment System (EPS)

Employers and Reporting Agents can create their EPS account(s) by submitting the corresponding form for their payment method selection. ACH Credit Agreement and ACH Debit Authorization Request forms should be submitted 2 weeks prior to the submission of the first ACH payment.

For further information or assistance regarding electronic payments, please contact the Employment Security Division, Electronic Payment System Customer Service, at (775) 684-6345, during regular business hours.

Employee Misclassification:

Contents:
What is employee misclassification?
What is the definition of an independent contractor?
Why is it important to correctly classify workers?
What are the penalties that an employer may be subject to regarding employee misclassification?
Where can I get additional information about employee classification?
As an employer how can I correct my error of misclassification?
How can I resolve misclassification issues with the IRS?

What is employee misclassification?

Employee misclassification occurs when an employer incorrectly classifies a worker as an independent contractor rather than an employee.

The practice of employee misclassification can be a costly mistake if left uncorrected. It is the responsibility of every employer to correctly identify workers and report wages for employees. If workers are misclassified as independent contractors and therefore not correctly reported, there are significant penalties for failure to report wages and pay related Unemployment Insurance (UI) tax.

Employee misclassification can also be an attempt by some employers to avoid their legal obligations under federal and state labor laws, employment and tax laws, including the laws governing minimum wage, overtime, unemployment insurance, workers� compensation, temporary disability insurance, wage payment, and federal income tax.

What is the definition of an independent contractor?

Nevada Unemployment Compensation Law does not define "independent contractor." It uses what is commonly referred to as the "ABC" test.

Unless otherwise specifically excluded, payment for services is subject to unemployment taxes as an employee, unless the following three conditions are met:

A. The person has been and will continue to be free from control or direction over the performance of the services, both under his/her contract of service and in fact; and

B. The service is either outside the usual course of the business for which the service is performed or that the service is performed outside of all the places of business of the enterprise for which the service is performed; and

C. The service is performed in the course of an independently established trade, occupation, profession, or business in which the person is customarily engaged, of the same nature as that involved in the contract of service.

A written contract alone is not sufficient; all three conditions must be met for the workers to be correctly identified as independent contractors.

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Why is it important to correctly classify workers?

Employee misclassification has serious adverse effects on employees, businesses, and the Nevada economy, including:

Increases the uncertainty of collecting unemployment insurance taxes to pay for unemployment insurance benefits to eligible workers.
Unfairly shifts the tax responsibilities from employers who are misclassifying employees to law-abiding Nevada employers.
Allows employers who misclassify their employees, and do not pay as required, to have an unfair competitive advantage over law-abiding businesses that are paying what is required by law.
Undermines fundamental laws intended to ensure employees receive legally required unemployment insurance benefits, workers' compensation, minimum hourly wage requirements, overtime pay, and other workplace protections.
Loss of revenue for services provided by federal, state, and local government due to non-payment of related taxes such as state business taxes and federal income tax withholding.

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What are the penalties that an employer may be subject to regarding employee misclassification?

Failure to report wages and pay related Unemployment Insurance (UI) tax could result in the following penalties:

Late filing charges are $5 for one or more days late; after 10 days late, additional charges are added at .1% of taxable wages paid for the quarter for each month or part of month delinquent.
Interest is added at the rate of 1% of the amount past due for each month or part of month delinquent.
Unemployment insurance tax evasion in Nevada carries a civil penalty of $5,000, or 10% of the total amount of any resulting underreporting and any other penalties and interest.
Attempts to avoid becoming or remaining subject to unemployment tax provisions or to reduce any contribution required is guilty of a category C felony, punishable by a sentence of 1 to 5 years.

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Where can I get additional information about employee classification?

The Contributions Section of the Employment Security Division is available to help Nevada Employers correctly classify workers. Regarding employee classification, please call the Employer Registration Unit at (775) 684-6310.

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Correcting misclassifications errors:

A payment agreement can be negotiated for the amount due, which will suspend any legal action against a business, as long as the taxes and penalties due are paid according to the agreement.

For questions or corrections to your reporting, please contact the nearest Field Audit Office location of the Employment Security Division, in Carson City at (775) 684‑6393, or Las Vegas at (702) 486‑0250.

How can I resolve misclassification issues with the IRS?

The Voluntary Classification Settlement Program "At a Glance"

Nevada Revised Statute 612.025 allows an alternate base period for determining entitlement to unemployment insurance benefits. A standard base period for a benefit claim is defined as the first four of the last five completed calendar quarters. If a claimant is monetarily ineligible under a standard base period, the law allows wages paid in the most recently completed calendar quarter to be considered for determining entitlement. Therefore, the most recently completed four calendar quarters will be used as the "alternate base period."

The impact of the law is, Nevada employers may be asked to provide wage information for a specific former employee, for the most recently completed quarter, prior to the usual quarterly reporting due dates.

Note: Employers who supply wage information "early" for an alternate base period, must still report that same information when filing and paying the quarterly unemployment insurance tax report.

If wage information is needed prior to the usual due date for the Employer's Quarterly Contribution and Wage Report, the employer will receive a request to provide the total amount of gross wages and any tips paid during the most recently completed quarter. The most likely months in which additional requests will be necessary are the months prior to each reporting cycle:

January - wages for the 4th quarter, prior to January 31 due date

April - wages for the 1st quarter, prior to April 30 due date

July - wages for 2nd quarter, prior to July 31 due date

October - wages for the 3rd quarter, prior to October 31 due date

It is important for employers to provide timely cooperation in supplying wage information, if requested. The quarterly wages are necessary to determine a person's entitlement to unemployment insurance benefits and, if claimant is eligible, will allow the benefits to begin without delay.