TX - Unemployment Insurance Reciprocal Agreements
From TaxAlmanac
TX - Unemployment Insurance Reciprocal Agreements.
When the business is located in Texas and the employee resides in Texas it is clearly Texas where the wages are reported for unemployment insurance. The answer is less clear when the employee works in multiple states or lives outside of Texas.
The Texas Labor Code, Title 4, Section 211 Reciprocal Agreement gives us the guidelines as where to report these wages. Texas uses the following 3 tests to determine where the wages is to be reported:
- Where does the individual perform the services ?
- Where is the state of the individuals residence?
- Which state does the employing unit maintain a place of business?
Example - Employee performs services in Louisiana, resides in Texas and maintains a place or business in Texas. Two of the three tests would indicate Texas is the state the unemployment taxes should be paid. If the employee lives in Louisiana and works in Louisiana but the employing unit is in Texas, then Louisiana would be the state unemployment taxes should be paid.
There are times when an employee has worked in two states and unemployment taxes must be paid in both states. Texas Labor Code §211.003 would apply here.
Texas Labor Code §211.003. COMBINATION OF WAGES AND EMPLOYMENT.
The commission shall participate in an arrangement for the payment of
benefits determined by combining an individual's wages and
employment covered under this subtitle and the wages and employment
covered under the unemployment compensation laws of another state
or the United States, or both, if the arrangement is approved by the
United States secretary of labor in consultation with the state
unemployment compensation agencies as reasonably calculated to
ensure the prompt and full payment of benefits. The arrangement
must provide for:
- Applying the base period of one unemployment compensation law to a claim that combines an individual's wages and employment covered under two or more unemployment compensation laws; and
- Avoiding the duplicate use of wages and employment because of the combination.
Example 1: Employee Y worked for employer X in Louisiana and earned $6000
in Louisiana. Later that year the employee Y worked for employer X in Texas and
earned $9000. The wage limitation in Texas is $9,000 and the wage limitation in
Louisiana is $7,000. How much of the wages earned in Texas does the employer X
have to pay unemployment taxes on for employer Y?
Texas wage base limitation ...............................................$9,000
Less Wages paid in Louisiana ...........................................$6,000
Texas subject wages on employee Y for employer X is.........$3,000
Example 2: Employee Y worked for employer X in Texas and earned $2,000.
Later that year Employee Y worked in Louisiana and earned $8000 in Louisiana.
Later that year the employee worked for employer X in Texas and earned $9000. The
wage limitation in Texas is $9,000 and the wage limitation in Louisiana is $7,000.
How much of the wages earned in Texas does the employer X have to pay unemployment
taxes on for employee Y?
Louisiana Wage base limitation ..............................................................$7,000
Less: Wage paid in Texas before working in Louisiana ..............................$2,000
Louisiana subject wages is......................................................................$5,000
Texas wage base limitation......................................................................$9,000
Less wages subject to unemployment tax in Louisiana...............................$5,000
Total Texas wage base limitation remaining for Employee Y........................$4,000
Total wages earned in Texas by Employee Y ($2,000 + $9,000).................$11,000
Employer X would pay tax the lesser of the two above on Employee Y..........$4,000
