What Is Unemployment Insurance Tax?

Unemployment Insurance tax is a tax on employer payrolls paid by employers and used to provide funds from which unemployment benefits are paid to qualified unemployed workers. Unemployment tax is not deducted from employee wages. Unemployment tax payments made by employers are transferred to the Unemployment Insurance Trust Fund in Washington. Employers receive credit for tax payments that are posted to an experience rating account. These credits are used to determine the rate schedule from which the tax rates for contributory North Carolina employers are assigned on an annual basis. Each year a prorated share of the interest earned on this trust fund is added back to the experience rating account of each North Carolina employer having a credit balance.

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