Unemployment Taxes

Unemployment Compensation was first begun as a national program during the Great Depression of the 1930's as part of a group of social insurance programs.  Its purpose was and is to provide compensation to workers who are unemployed through no fault of their own until, normally, they are able to go back to work.  The amounts payable as benefits are intended to cover non-deferrable expenses during unemployment, such as housing, food, clothing, and necessary transportation. 

The benefits paid help maintain purchasing power which many consider the key to business prosperity.  In this way, unemployment compensation promotes economic stability and helps to stave off the downward cycles that lead to depressions.  Businessmen credit this program with playing an important part in bringing about quick recoveries from business recessions. 

Your contributions (taxes) paid to the Virgin Islands Government are used exclusively for payment of unemployment benefits to individuals who are eligible under the law.  Your Federal unemployment taxes (FUTA) are used primarily to finance the administration of the Unemployment Insurance and Employment Service programs in the Virgin Islands.  For the purposes of the Unemployment compensation and Employment compensation and Employment service programs, the Virgin Islands is treated as a State.

Background of Unemployment Compensation

Important Highlights 

The following is a capsule summary of the most significant aspects of an employer's rights and responsibilities under the law.  Each of these points is discussed elsewhere in this pamphlet. 

Required Record Keeping 

An employer who pays wages to anyone in the Virgin Islands must maintain certain prescribed records which are to be retained for the current and at least the five preceding calendar years.  These and other records relating to the employer's business must be available for inspection upon request.  Failure to produce these records, when requested, is a violation of the law and may result in a penalty.  

Reporting Requirements 

When an employer begins business operations in the Virgin Islands, he is required to notify the Agency promptly in order to have his tax status determined. Contributions and wage reports are required for each calendar quarter that an employer is covered under the law.  The respective due dates are April 30, July 31, October 31, and January 31. 

The forms for making those reports are mailed to employers well in advance of the due dates. Failure to file reports and pay the contributions (taxes) due by the due dates may result in assessments of interest and penalties; it may also adversely affect an employer's contribution rate in future years.  SUCH REPORTS ARE REQUIRED EACH QUARTER, EVEN THOUGH AN EMPLOYER MAY NOT HAVE PAID ANY WAGES DURING THE QUARTER. 

Whenever an employer discontinues business in the Virgin Islands, transfers his business, or changes his legal form (e.g. from a partnership to corporation), he must notify the agency.  This information may be noted on the final quarterly tax report or in letterform addressed to the agency's Director or Chief of Tax. 

Employment Subject To Law 

Service performed for any employing unit in the Virgin Islands is subject to contributions, unless specifically excluded under the law.  In general, service is covered if performed for some portion of a day in the current or preceding calendar year.  If two or more businesses or establishments are owned or operated by the same employer, they will be treated as a single employing entity for purposes of the law.  See, however, the special rules that apply to household employee coverage below.

Tax Computation and Payment

The base amount of each employee’s total earnings received as remuneration for covered employment during a calendar year is subject to contributions payable by the employer.  The base amount is computed for each tax (calendar) year as an amount equal to 60.0% of the average annual wage in insured work in the Virgin Islands, rounded to the nearest $100.00.

Almost every form of remuneration paid to an employee is subject to contributions, including salaries, wages commissions, tips, bonuses and the reasonable cash value of any meals or lodging provided. A Tax rate is assigned to each employer for each taxable year. Notice of the rate assigned is mailed by January 31st of each year. Penalties are assessed on all delinquent wage and contribution reports, but not to exceed $60.00 per year.  Interest is assesses on all delinquent contribution and reports at a rate of 9.0% per annum. 

Non-Profit Organization and Governmental Entities

 All employees of non-profit organizations and Virgin Islands governmental entities are covered under the Virgin Islands Unemployment Insurance Program.  Both non-profit organizations and separate governmental entities may elect to finance their participation in the unemployment insurance program under the benefit reimbursement option rather than contribution (tax) method. 

Charging of Benefit Payments 

Benefits paid to a claimant are charged to the experience rating or reimbursement accounts of employers who paid wages to the individual during the base period of the claim.  See "base period" under "Definitions".  Employers are notified of these charges quarterly. An employer should promptly contact the local office if:  

a. He has work available for the claimant;           

b. The claimant has declined an offer of employment or reemployment; or           

c. He believes the claimant is currently working or otherwise not entitled to benefits. 

He should also contact the Agency if he believes the benefits charged are incorrect for any reason.

Contributions

 Who is liable? 

Employing Units, for which services are performed by one or more individuals at any time in "employment," as defined in the law, are normally subject to contributions.  The services may be performed full-time or part-time, by adults or minors. If individuals perform personal or domestic service in a private home or in a local college club, fraternity, or sorority and the aggregate payroll in that location equals or exceeds $500.00 in remuneration in a calendar quarter in the current or preceding calendar year, the employees are in covered employment and their wages are normally subject to contributions. 

Wages   

The term "wages" for the purpose of unemployment insurance under the Virgin Islands law means any remuneration for personal services.  The term includes tips, commissions, bonuses, the cash value of meals, lodging, laundry, and other means of payment for employment.  Wages are reportable by employers in regard to the quarter when paid. The following payments are a few examples of those not considered to be wages:

  •   The employer's share of contributions to a fund under a plan or system for retirement  benefits or health and life insurance.

  •   Courtesy discounts on purchases. 

  •   Sick pay paid under a third party plan or system
  •   Travel expenses actually incurred and paid

 

Base Federal Unemployment Tax Rate  6.0%

Surtax for Fund Building                            +.2%

Total Federal Unemployment Tax Rate     6.2% 

 

The Federal offset credit is 90% of the Federal Base Tax. 6.0 X .90 = 5.4% 

 

The total Federal unemployment tax would be reduced by the credit as follows: 

Total Federal Tax     6.2%

Offset credit               -5.4%

Net Federal Tax            .8% 

 

QUARTER COVERED DUE BY
January, February, MarchApril 30
April, May, JuneJuly 31
July, August, SeptemberOctober 31
October, November, December January 31
The Agency has no authority to grant extensions of time to file quarterly reports or to pay contributions. Reimbursing employers are required to make payments in lieu of contributions within 30 days after billed. Employer's quarterly reports are mailed to every employer in active status.
The forms are preprinted with the employer's name, address, account number, quarter and year to be reported, due date, the tax rate and taxable wage base to be used in computing the tax due. If for any reason you fail to receive this form, you should request that a form be mailed to you. Whenever possible, you should use the preprinted form in order to insure correct processing of your report.
FAILURE TO RECEIVE THIS FORM DOES NOT RELIEVE YOU OF THE RESPONSIBILITY FOR FILING THE REPORT.
This handbook (Adobe Acrobat printable format) has been prepared to provide a simplified explanation of the tax, benefit, and appeals provisions of the unemployment insurance program of the Virgin Islands. It does not take precedence over the law or regulations, and is subject to change at any time as a result of statutory amendments, regulatory revisions, court decisions, federal requirements, and Agency procedural changes.

This handbook   (Adobe Acrobat printable format) is intended to provide employers in the Virgin Islands with information necessary to protect their experience rating accounts and to inform them of their rights and responsibilities under the law.

       The Handbook can be downloaded below
 
Downloads
 
  1. WOTC Brochures

  2. Unemployment Insurance Handbook

  3. Resources for Third Party Business Groups to Provide to Member

  4. Protect Your Business From Higher Taxes

  5. Test Your Knowledge: How to Minimize UI Taxes

 
 
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