NYS Department of Labor business liability under federal unemployment tax act - need guidance
I'm trying to figure out if my small consulting business needs to pay into the NYS Department of Labor unemployment insurance system under FUTA requirements. We have 3 part-time contractors who work about 15-20 hours per week each, and I'm getting conflicting information about whether they count as employees for unemployment tax purposes. The NYS Department of Labor website isn't super clear about the distinction between contractors and employees when it comes to UI tax liability. Has anyone dealt with this classification issue before? I don't want to get hit with penalties if I'm supposed to be paying unemployment taxes but haven't been.
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Elijah Jackson
The key factor for NYS Department of Labor unemployment tax liability is whether your workers are classified as employees or independent contractors under the ABC test. If they fail any part of the test (free from control, outside usual business, independent enterprise), they're employees and you owe UI taxes. With 15-20 hours weekly, they might not meet the 'independent enterprise' requirement.
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Isabella Martin
•That's exactly what I was worried about. They do similar work to what my business does, so probably not independent enterprises. Do you know what the penalty is if I've been classifying them wrong?
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Sophia Miller
oh man this happened to my brother's business last year. turned out his 'contractors' were actually employees according to NYS Department of Labor and he owed like $8000 in back unemployment taxes plus interest
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Isabella Martin
•Yikes! How did they find out? Did someone file for unemployment benefits?
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Sophia Miller
•yeah exactly, one of his workers got laid off and filed for unemployment. thats when NYS Department of Labor started asking questions about the employment relationship
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Mason Davis
You need to register with NYS Department of Labor for unemployment insurance if you have employees who earn $300+ in any calendar quarter. The determination isn't just about hours - it's about the level of control you exercise and whether the work is integral to your business operations. I'd recommend getting a formal worker classification determination from NYS Department of Labor before you get deeper into this.
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Isabella Martin
•How do I request a formal determination? Is there a specific form I need to file with NYS Department of Labor?
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Mason Davis
•You'll want to file Form IA 2.3 (Request for Ruling on Status of Worker) with NYS Department of Labor. It's better to get clarity now than deal with an audit later.
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Mia Rodriguez
I had a nightmare trying to get through to NYS Department of Labor about this exact issue last month. Their phone lines are constantly busy and when you do get through, you get transferred around forever. I ended up using claimyr.com to actually reach a real person who could explain the classification rules. There's a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. Way easier than spending hours on hold.
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Jacob Lewis
•Never heard of that service before - did they actually help you figure out the worker classification thing or just get you connected?
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Mia Rodriguez
•They got me through to an actual NYS Department of Labor specialist who walked through the ABC test with my specific situation. Saved me probably 10+ hours of phone tag.
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Amelia Martinez
honestly the whole system is rigged against small businesses, you're damned if you do damned if you dont with these worker classifications. NYS Department of Labor just wants to collect more taxes so they'll find any excuse to call your contractors employees
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Elijah Jackson
•The rules exist to protect workers from being misclassified to avoid paying benefits they're entitled to. It's not about collecting more taxes, it's about ensuring proper coverage.
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Ethan Clark
same boat here... have 2 people who work maybe 12 hours a week but they use my equipment and follow my schedule so probably employees not contractors :( still trying to figure out if I need to backpay unemployment taxes
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