Confused about what wages are subject to unemployment tax - need clarification
I'm trying to understand what wages are subject to unemployment tax for my small business. I know there's a wage base limit but I'm getting conflicting information about what types of compensation count. Does anyone know if bonuses, commissions, and overtime are all subject to NYS Department of Labor unemployment tax? And what about things like vacation payouts or severance packages? I want to make sure I'm calculating everything correctly for my quarterly filings.
14 comments
Join the conversation
DeShawn Washington
Most wages are subject to unemployment tax up to the annual wage base. For 2025, the wage base is $12,300 per employee. This includes regular wages, overtime, bonuses, commissions, vacation pay, and severance. There are some exceptions like certain fringe benefits and reimbursements, but most cash compensation counts toward the taxable wage base.
0 coins
Lena Kowalski
•Thanks! So if an employee makes $50,000 a year, I only pay unemployment tax on the first $12,300 of their wages?
0 coins
Mei-Ling Chen
Yes, that's correct. Once you hit the wage base limit for each employee, you stop paying unemployment tax on their wages for the rest of the year. The NYS Department of Labor website has a detailed breakdown of what's included and excluded. Things like employer-paid health insurance premiums and qualified pension contributions are generally not subject to the tax.
0 coins
Sofía Rodríguez
•Wait, so if someone gets a big bonus in January that puts them over the wage base, do I stop paying unemployment tax on their regular wages for the rest of the year?
0 coins
Mei-Ling Chen
•Exactly! It's per employee per calendar year. So if that January bonus puts them over $12,300, you're done paying unemployment tax on that employee's wages until the next year.
0 coins
Aiden O'Connor
I had issues with this last year because I wasn't sure about tips and gratuities. Turns out those count too if they're reported wages. Had to file an amended report with NYS Department of Labor when I realized my mistake. Make sure you're tracking everything properly from the start!
0 coins
Lena Kowalski
•Good point about tips! I don't have tipped employees but that's definitely something to remember if I ever hire restaurant workers.
0 coins
Zoe Papadopoulos
ugh the whole unemployment tax system is so confusing... why cant they just make it simple like a flat rate on everything??
0 coins
DeShawn Washington
•I understand the frustration, but the wage base system actually protects both employers and the unemployment insurance fund. It ensures there's adequate funding while capping the tax burden on higher-wage employees.
0 coins
Jamal Brown
If you're having trouble reaching NYS Department of Labor to get official clarification on specific wage situations, I found this service called Claimyr (claimyr.com) that helps you get through to actual agents. They have a video demo at https://youtu.be/qyftW-mnTNI showing how it works. Saved me hours of busy signals when I needed to resolve a wage base question last quarter.
0 coins
Lena Kowalski
•That might be helpful - I've been trying to call for weeks about some specific fringe benefit questions but can never get through.
0 coins
Fatima Al-Rashid
same situation here, small business owner trying to figure this all out. thanks for asking the question!
0 coins
Lorenzo McCormick
For anyone else dealing with this, I'd recommend keeping a detailed spreadsheet tracking each employee's wages throughout the year so you know exactly when they hit the $12,300 threshold. I also set up quarterly reminders to review the wage base calculations before filing. The NYS Department of Labor Form NYS-45 instructions are actually pretty helpful once you get through all the legal language - they have examples of what counts and what doesn't.
0 coins
Carmen Sanchez
•That's really helpful advice about the spreadsheet tracking! I'm definitely going to set that up. Do you happen to know if there are any penalties for getting the wage base calculations wrong, or is it just a matter of filing amended reports if you mess up?
0 coins