Employers Covered Under the Law

Table of Contents

Determining Your Liability

A liable employer is required to report wages and pay unemployment insurance (UI) contributions to Iowa Workforce Development’s (IWD’s) UI Division. There are three classification of liable employers: 

  1. Wages paid and business type
  2. Successorship
  3. Elective coverage 

Information regarding these classifications is provided in more detail below.  Part-time, seasonal, or temporary employees are counted the same as full-time employees. 

Note: Officers of a corporation are included as employees if they perform services.

Wages Paid and Business Type

The employer becomes liable if it meets any of the following criteria.  Liability is retroactive to the first quarter wages were paid.

Wages Paid

  • Paid wages in any calendar quarter, in either the current or preceding calendar year for service in employment.

Non-Profit Organizations  - 501(C)(3)

  • Religious, charitable, scientific, literary, educational, or organizations working for the prevention of cruelty to children or animals.
  • Paid wages in any calendar quarter in either the current or preceding calendar year for service in employment.
  • These organizations may request a reimbursable status to reimburse the Iowa UI Trust Fund for any UI benefits paid rather than paying a contribution into the Fund (this status remains in effect a minimum of two years). A 501(c)(3) Internal Revenue Service tax exempt letter is required to request a reimbursable status.
  • Refer to section 96.7.8 of the Iowa Code for additional information about reimbursable status.

Agricultural Laborers

  • Paid gross wages of $20,000.00 or more to agricultural laborers in any quarter of the current or previous calendar year.
  • Employed 10 or more employees in some portion of a day in 20 separate weeks in the current or previous calendar year. 

Domestic Employees

  • Paid wages of $1,000.00 or more to domestic employees during any calendar quarter in the current or previous calendar year.

Government Entities

  • Cities, counties, school districts, townships and community college districts are required to reimburse IWD for any UI benefits paid. 

  • These entities can elect to pay contributions if the election is made within the time specified by law.

Successorship

  • Employer becomes liable for UI contributions on the date you acquire all or part of another existing employer’s business (if the business is liable prior to the acquisition).
  • It is the buyer's responsibility to obtain information regarding the UI contribution rate, debt and future benefit charges, as all or part of the account experience may be transferred to the acquiring employer's UI account.
  • After acquiring a business, you should make a formal and specific offer of work to each employee of the former owner who you wish to retain.
  • The offer should outline duties, pay rate, work days, and work shift.
  • Please report any refusals by  logging into your employer portal on iowaworks.gov and filling out the Separation Notice Alleging Disqualification form located under the Unemployment Services for Employers section.  Sellers who fail to disclose information to the purchasing employer about UI benefits charged to their account are liable for actual damages and attorney fees to the acquiring employer. 

Elective Coverage

  • An employer who does not meet UI liability may elect to become liable.
  • This allows your employees to be covered under the Iowa Employment Security Law and receive UI benefits, if eligible.
  • The employer becomes liable for contributions based on the effective date in the application. The election is valid for a minimum of two years.
  • You may cancel your election to become liable by submitting a written request by February 15th  following the year in which you wish to end your election.
  • Pease complete and file the Voluntary Election to Become an Employer form for elective coverage.
  • If you don't have employees, you may also complete and file the Voluntary Election to Constitute Services form. IWD’s UI Division will review the form and determine if you qualify. 

Excluded Services and Wages

Common exclusions when counting employees and determining if the wages are reportable include: 

  • Individual owner of a business (sole proprietor)
  • Partners of a partnership
  • Limited liability members are excluded if paid in proportion to ownership interest
  • Family employment
    • Father or mother working for a son or daughter.
    • Husband or wife working for his or her spouse.
    • Children under 18 years of age employed by a father or mother.
    • The exclusions can apply to a partnership if an exempt family relationship exists between the employee and each of the partners.

Note:  Family employment exclusions apply to an individually owned business and not to a corporation or a limited liability company. 

  • Sick or disability pay if payments are made under an employer plan that applies to its employees generally or to a class of employees.
  • Services when employed by a school, college, or university by a student who is enrolled and regularly attending classes, and/or services performed by the student’s spouse hired under a program to provide financial assistance (the spouse is advised of the fact at the time of hire).
  • Services performed by a student for an employer as a formal and accredited part of the curriculum of the school.
  • Services when employed by a church, convention or association of churches, or organization which is operated, supervised, controlled, or principally supported by a church, convention or association of churches, which is operated primarily for religious purposes (example: the service of a janitor in a church is excluded, but the service of a janitor for a separately incorporated college which is not operated primarily for religious purposes, although it may be church related, is covered employment).
    • Services performed by ministers and by members of religious orders (in the exercise of their ministry) in performing the duties required by their orders.

Employer Audits

The United States Department of Labor requires Iowa Workforce Development (IWD) to perform an Unemployment Insurance (UI) tax account audit on a percentage of Iowa employers each year.  The audits are conducted to ensure compliance with the provisions of Iowa Code, Section 96.11.6(a) and Iowa Administrative Code 871, Chapter 22.17(4).  This requirement results in several thousand Iowa employers being selected for a UI tax account audit each year. 

Businesses with or without an active UI account may be selected for an audit to determine if they are a liable employer.  Under Iowa law employers are required to provide records for examination as defined in Iowa Administrative Code 871 Chapter 22.17(2).   

Employer field auditors are assigned to specific territories throughout Iowa. Territories are assigned based on mailing address ZIP code on the employers' account. Employers can contact the field auditor assigned to their account for any questions.  

Misclassification of Workers

It is critical that business owners correctly designate whether the individuals providing services are employees or independent contractors. 

Generally, an employer must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. An employer does not generally have to withhold or pay any taxes on payments to independent contractors. 

Intentional misclassification constitutes tax and insurance evasion. Employers misclassifying their workers may face the following consequences: 

  • Penalties and fines
  • Interest on back taxes
  • Criminal charges under various laws​ 

 For more information or to report suspected misclassification of workers, visit: Employer Audits and Misclassification of Workers. 

Appealing Your Unemployment Tax Decision

Employers who do not agree with a UI tax decision may file an appeal and present testimony and documents to an administrative law judge.  The appeal must be submitted in writing and filed within 30 days of the decision date.  The decision will be final if you do not file an appeal.  Your appeal must be in writing and mailed, emailed or faxed to: 

Iowa Workforce Development 
Unemployment Insurance Tax Bureau 
1000 East Grand Ave. 
​Des Moines IA 50319-0209 

Email: iwduitax@iwd.iowa.gov 

Fax: 515-242-5247 

The appeal must also include: 

  • Company name, address and Iowa UI account number
  • Decision date
  • A statement that you are asking for an appeal
  • Your reason for appealing 

Employer’s must report employees' wages on a quarterly basis.  If your appeal is on time, payment of the computed contribution is not an agreement to the amount owed. 

Once the appeal is scheduled, you will receive further communication from the Division of Administrative Appeals under Iowa Department of Inspections, Appeals, and Licensing that includes an appeal packet, date and time of appeal and instructions for participation. 

For more information, visit: Unemployment Insurance Appeals