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Taxes

HOW ARE UNEMPLOYMENT BENEFITS FUNDED?

Unemployment benefits are financed by a payroll tax collected by the Department of Employment Services (DOES) from employers doing business in the District of Columbia. These taxes are deposited in a trust fund managed by the U.S. Treasury Department. The deposits and accrued interest in the trust fund can be used only for the payment of unemployment benefits.

WHAT SHOULD I KEEP FOR MY RECORDS?

Each employer must maintain accurate and up-to-date records on all employees. This includes payroll sheets, cards, or any other business records that contain the following information:

  • Name and social security number of each employee.
  • Beginning and ending dates of each payroll period, and the date of payment.
  • Wages paid for each pay period, including gratuities and tips, and employee expenses.
  • Dates of employment and the date and reason for separation.

Records should be retained for up to seven years.

WHAT IS MY TAX RATE?

Employers who are new to the process of paying unemployment insurance taxes are assigned a standard tax rate. This standard tax rate a new employer must pay is equal to the average of all the tax rates paid by all employers in the District during the preceding year, or 2.7%, whichever figure is higher. The standard tax rate for a particular year is the same for all newly registering employers.

Employers other than those who are new to paying payroll taxes to the District are rated based on the unique experience they have had with the District’s unemployment program. For more information on the tax rating process, please review DOES’ Unemployment Insurance Handbook for Employers here.

WHAT FACTORS DETERMINE THE EXPERIENCE RATE?

Here are the factors that could affect an employer’s experience rate:

  • The amount of unemployment insurance benefits paid to former employees
  • The amount of taxes paid
  • The average size of an employer's annual taxable payroll for the past three years

Please view the Unemployment Insurance Handbook for Employers to learn more about the experience rating process.

For more information, please check out these resources: