Unemployment Insurance Tax
Every employer in Tennessee is required to fill out a Report to Determine Status, Application for Employer Number (LB-0441). Submitting this form will determine the status of your liability for unemployment insurance. If you are liable for unemployment insurance premiums in Tennessee, you will be assigned an eight-digit employer account number (e.g., 0000-000 0).
Professional Employer Organizations (PEO) must also file an Application for Client Number (LB-0910) for each client in Tennessee.
Obtain an Employer Number
Applications may be downloaded by choosing one of the forms below or by calling toll free 844-224-5818 and pressing option 1, then option 2 for Employer Taxes.
The completed application can be mailed or faxed to the Employer Services Unit. Allow ten (10) business days for processing. The Employer Account number will be mailed to the address provided on the form.
Who is Liable to Pay Unemployment Taxes?
Liability depends on the type and nature of the business, the number of workers employed, and the amount of wages paid.
Employers who are liable to pay unemployment taxes include the following:
- An employing unit that is liable under the Federal Unemployment Tax Act (FUTA) and has at least one employee in Tennessee regardless of the number of weeks employed or amount of payroll..
- An employing unit that pays $1,500 or more in total gross wages in a calendar quarter, or has at least one employee during twenty different weeks in the current or preceding calendar year regardless of the wages. The employee does not have to be the same person for twenty weeks. It is not relevant if the employee is full-time or part-time.
- An employer who has acquired all or part of the business of another employer who was already liable.
- An employing unit that is a non-profit organization as described under section 501(c) (3) of the IRS code and has four or more employees during each of 20 weeks in the current or preceding calendar year. Officers of a nonprofit corporation are counted even if such officers do not receive remuneration for their services from the nonprofit corporation.
- An employing unit that volunteers to become liable even though they do not currently meet the required criteria.
- All state and local government units and political subdivisions.
- An employing unit that paid cash wages of $1,000 or more in any calendar quarter of the current or preceding calendar year for domestic services.
An employing unit engaged in agricultural labor if:
- It employs 10 or more employees for 20 weeks or more in the current or preceding calendar year.
- It pays $20,000 or more in gross wages in a calendar quarter
Independent Contractor or Employee?
Employers often utilize independent contractors as a way to save money and operate their businesses more efficiently. As an employer, it is critical that you correctly determine whether individuals rendering personal services to you are employees or independent contractors.
Tennessee Employment Security Law establishes another test for determining whether or not a worker is an employee. This test found in T.C.A. Section 50-7-207(e) is known as the ABC Test. Service performed by an individual shall be deemed included service (i.e., employment) irrespective of whether the common-law relationship of master-servant exists, unless and until it is shown to the satisfaction of the Administrator that all three conditions of the test are met.
To be considered an independent contractor for unemployment insurance purposes, an individual must meet all three of the following conditions:
- Such individual has been and will continue to be free from control and direction in connection with the performance of such service, both under any contract for the performance of service and in fact
- Such service is performed:
- Outside the usual course of business for which the service is performed.
- Is performed outside of all the places of business of the enterprise for which the service is performed
- Such Individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.
The determination of independent contractor status versus employee status is often a complex decision. It is important to correctly classify workers. For guidance, read more from the Employee Misclassification Education and Enforcement Fund (EMEEF).
Employees Paid Through a Professional Employer Organization (PEO)
Each Professional Employer Organization (PEO) which co-employs one (1) or more individuals with a client in Tennessee must complete and file the Report to Determine Status, Application for Employer Number (LB-0441). The PEO will then be assigned an Aggregate State Number. In addition, the PEO must file an Application for Client Number (LB-0910) for each Tennessee client and must notify the Department of Labor and Workforce Development in writing of any client additions or deletions during the quarter in which the change occurs.
The PEO must keep separate records and must file separate quarterly Premium and Wage Reports (LB-0456/LB-0851) for each client under their Client Number. The client’s premium rate each quarter will be the premium rate for the PEO’s Aggregate State Number. Detailed information on how the premium rate for the Aggregate State Number is calculated is provided in the Handbook for Employers.
New employer premium rates apply to PEOs that do not qualify for rates based on their own experience. The new employer premium rate will be assigned based on the reserve ratio of the PEO’s 2-digit NAICS classification.
A client is jointly and severally liable with the PEO for premiums on all applicable employee wages covered under the professional employer agreement unless the PEO has posted a $100,000 corporate surety bond with the Administrator of the Division of Employment Security.