Reporting corporate officers

Jump to:

Section 1: The law on unemployment-insurance coverage for corporate officers

1. What is the law and when did it take effect?
Officers who provide services in Washington are automatically exempt from unemployment insurance unless the employer specifically requests to cover them. The law applies only to corporations. This law took effect December 29, 2013.

2.  How do you define a corporate officer?
Corporate officers are described in a corporation’s bylaws or appointed by the board of directors in accordance with the bylaws. A duly appointed officer may appoint one or more officers or assistant officers if authorized by the bylaws or the board of directors. The bylaws or the board of directors shall delegate an officer with the responsibility for preparing minutes of the directors' and shareholders' meetings and for authenticating records of the corporation. The same individual may simultaneously hold more than one office in a corporation.

3.  How did Employment Security notify us about the change in law?
We used the following notification methods: 

• Business Update articles in September 2013 and December 2013
• Emails to employers and corporate officers with email addresses on file
• Robocalls
• News release
• Newsletter article for chambers of commerce and major business organizations’ newsletters
• Message on the EAMS tax-filing site
• Employment Security website
• 4th-quarter 2013 – note in quarterly tax mailing
• 1st-quarter 2014 – Mailing to corporations that report without requesting coverage.

(back to top)

Section 2: Coverage

4.  What does it mean to be covered by unemployment insurance?
If your corporate officers are covered for unemployment benefits, you must report them as employees and pay state unemployment taxes on their wages each quarter. They may be eligible for unemployment benefits if they lose their jobs. See question 41 for limitations on corporate-officer unemployment benefits.

If your officers are exempt from coverage: (a) you would not be required to pay state unemployment taxes on them, and (b) they would not be eligible for benefits if they lose their jobs. NOTE: You must pay full federal unemployment taxes (FUTA) on exempted corporate officers. See question 25.

5. How do we request coverage for our corporate officers?
If you want to cover your corporate officers, you must submit a Voluntary Election Form (PDF, 80KB). If you need a paper form, contact our Registration and Rates Unit at status@esd.wa.gov.

6. Can we cover some corporate officers and not others?
No. By law, the corporation must either cover all corporate officers or none of them.

7. How will we know that our request for coverage was approved?
You will receive a signed approval letter. If you submitted a request and did not receive a response, send an email to status@esd.wa.gov or call 360-902-9360.

8. After we request coverage, when does it take effect?
The effective date of coverage depends on whether you are a newly registered employer or already registered with us.

• New employer
  For a new corporation or one newly registered with us, the deadline is the end of the month following the quarter for which the corporation wants to begin coverage. We must receive your Voluntary Election Form (PDF, 80KB) by the last day of the month after the quarter you register your business with us.  For example, if you register with us in the first quarter of 2014, you must submit the form by the last business day in April.

• Already registered with us?
  The deadline to cover your corporate officers is the first day of the last month of the quarter you want to begin coverage. We must receive your request by the first day of the last month in the quarter in which you want coverage to begin.  For example, for the first quarter of 2014, the deadline is March 1.

9. How long does the voluntary coverage last?
Coverage lasts a minimum of two full calendar years, unless cancelled by us. After two full calendar years of coverage, an employer may terminate the coverage beginning January 1, by filing a written request for termination of coverage by January 15 of that year.

10. We requested corporate-officer coverage more than two years ago, and we’ve had the same officers the whole time. Do we need to fill out another form, or will coverage automatically carry over in 2014?
Yes. You must submit the Voluntary Election Form (PDF, 80KB) again and we must approve the form

(back to top)

Section 3: Non-coverage

11. How do we exempt our corporate officers from unemployment coverage?
Corporate officers are automatically exempt unless the corporation requests coverage and we approve it. Corporations with employees must request to cover their officers, or they will not be covered. Beginning December 29, 2013, the deadline for a registered corporation to cover its corporate officers is the first day of the last month of the quarter for which the corporation wants coverage. For a new corporation, the deadline is the end of the month following the quarter for which the corporation wants coverage. (See question 8 for examples.)

If you did not submit a Voluntary Election Form and did not receive approval from us, your corporate officers are not covered for unemployment insurance. You will not report them as employees and will not pay state unemployment taxes on their wages each quarter.

12. Do we have to notify our corporate officers that they are not covered?
If an employer chooses to not cover its corporate officers, the employer must notify the officers in writing that they are ineligible for benefits. Even if an employer fails to provide notice, the officers remain ineligible for benefits.

(back to top)

Section 4: Affected businesses

13. Does the law apply to businesses other than corporations?
No. The law applies only to corporate officers in corporations. It does not apply to sole proprietors, partnerships, limited liability companies (LLCs), etc. The law also does not apply to governmental and tribal corporations, as well as certain nonprofit corporations. This excludes 501(c) (3) nonprofit corporations, as they are always expected to report their corporate officers to us.

14. Does the law apply to board members or just corporate officers?
The law applies to corporate officers; it does not apply to board members of corporations unless they are also corporate officers. Corporate officers include the people authorized as such in your corporation’s bylaws.

15. Does the law apply to 501(c) (3) nonprofit corporations?
In general, no. In fact, federal law provides that nonprofits that are exempt under section 501(c)(3) of the federal Internal Revenue Code and those that reimburse costs instead of paying taxes must provide unemployment coverage for their corporate officers.

Note: 501(c)(3) nonprofit corporations do not need to register or report volunteer officers.

There may be cases where a corporate officer of a nonprofit corporation that is not tax exempt (under 501(c)(3)) earns wages from the corporation and seeks exemption. In those circumstances, we will treat the exemption for the nonprofit corporation the same as for a private corporation.

16. Does the law apply to non-501(c) (3) nonprofit corporations?
Yes, they will be treated as for-profit corporations.

17. Can a business set up as a limited liability company (LLC), sole proprietorship or partnership submit a Voluntary Election Form for the owner(s)?
No. Owners, such as "members" of a limited liability company, partners of a partnership or owners of a sole proprietorship are not covered by unemployment insurance. (WAC 192-300-190)

(back to top)

Section 5: Voluntary Election Form

18. Do we have to fill out a form to cover our officers? What are the deadlines?
The deadline to cover your corporate officers is the first day of the last month of the quarter you want to begin coverage. For a new corporation, the deadline is the end of the month following the quarter for which the corporation wants to begin coverage. (See question 8 for examples.)

If you want to cover your corporate officers, you must submit a Voluntary Election Form (PDF, 80KB). Or get a paper form by contacting us at status@esd.wa.gov or 360-902-9360.

Information on the election form must match your corporate registration information on file in order to process your request for election. To update corporate-registration information, submit the Update Ownership Information form (EMS 5208C-2).

Once we approve your request to cover your corporate officers, the coverage will stay in effect while the officers remain eligible. You will not have to reapply next year. However, you are required to notify us if the corporate officer is no longer eligible for election. See question 38.

19. What happens if no form is submitted?
Your corporate officers are not covered for unemployment insurance. You must submit a Voluntary Election Form, and we must approve the request, before your officers are covered.

20. We did not submit a Voluntary Election Form, but did pay unemployment taxes for the first quarter of 2014. Doesn’t that indicate our intent? Does that take the place of filing a Voluntary Election Form?
No. At least one of the governing individuals of the corporation must submit a Voluntary Election Form to cover all corporate officers. By law, the corporation must cover all corporate officers or none of them; it can’t cover some and not others. Note: Your tax report could be amended. See question 49 for more information.

21. Can we fill out and submit the Voluntary Election Form online?
No. The law requires a signature of at least one of the governing individuals of the corporation whose officers are to be covered.

22. Is there a form for requests to continue coverage after two years?
No. After the end of the mandatory two-year coverage period, coverage will continue for each subsequent year unless the corporation files a written request for termination of coverage by January 15 of the year it wants to end coverage.

23. Whom do we contact if we have questions or need help?
Please email or call the RISC Unit at status@esd.wa.gov or 360-902-9360.

(back to top)

Section 6: Unemployment taxes

24. How will covering our corporate officers affect our state unemployment taxes?
You must include covered corporate officers and their in-state taxable wages in the quarterly reports that you file for unemployment insurance. You would pay state unemployment taxes on your covered corporate officers each quarter just as you do for all other corporate employees.

25. How will covering our corporate officers affect our federal unemployment taxes?
If your officers are not covered, you will lose your Federal Unemployment Tax Act (FUTA) tax credit for them. Your total taxes (state taxes and FUTA) may go up or down, depending on the salaries of individual corporate officers and your state tax rate.

26. Will our total state and federal unemployment taxes go up or down if we do not provide coverage for corporate officers?
It is difficult to give a general rule for whether your total state and federal unemployment taxes will go up or down. Some of the factors are the salary you pay the corporate officer, your corporation’s state tax rate and the total difference in wages among all employees (excluding corporate officers) between the federal taxable wage base ($7,000 as of November  2013) and the state taxable wage base ($41,300 for 2014).

You may wish to consult your bookkeeper or accountant about the effect of exempting corporate officers on your state and federal unemployment taxes. We cannot answer questions about what will happen to your specific tax rates for state or federal taxes.

(back to top)

Section 7: Reporting covered corporate officers

27. How do we report covered corporate officers on our quarterly UI Tax and Wage Reports?
If your corporate officers have been approved for coverage and you have employees, you must report these corporate officers quarterly in the same way you report your employees. This also applies if you do not have other employees, but have voluntarily covered your corporate officers.

Include the names, Social Security numbers, hours and wages of each corporate officer on the quarterly Wage Detail report, and include their total wages when you report total gross wages for the corporation.

28. How do we report corporate officers who are not covered on our quarterly UI Tax and Wage Reports?

If you have not requested coverage, report the number of corporate officers and their combined wages or earnings on the summary tax pages, but do not include their names, hours or wages on the quarterly Wage Detail report.

If you file your quarterly reports using Employer Account Management Services (EAMS) file these under the Exempt Earnings screen. If you use a paper Quarterly Tax Report, report the number of exempt officers on line 10 and the amount of their wages on line 9.

If you do not have employees and have not requested voluntary coverage for your corporate officers, you do not have to file.

(back to top)

Section 8: Denial, cancellation and termination of voluntary coverage

29. When would a request for coverage be denied?
We reserve the right to disapprove a request for coverage. Typically, a denial will occur when the applicant is not liable for federal unemployment taxes (FUTA) or the occupation or industry is seasonal. (WAC 192-300-170)

30. When would voluntary coverage be cancelled by Employment Security?
We reserve the right to cancel voluntary coverage. Typically, a cancellation will occur when unemployment taxes aren’t paid or the employer fails to file an unemployment tax and wage report, misrepresents facts, or the like.

31. If Employment Security denies our voluntary-election request or cancels an approved voluntary election, can we appeal?
We will send you an official denial letter. If you disagree, you may appeal that decision by filing an appeal in writing within 30 days. Mail your appeal to: Tax Appeals, Employment Security Department, P.O. Box 9046, Olympia WA 98507-9046. Your appeal should identify your name, business name, address, telephone number, ESD number, the decision/document that you are appealing and the reason you disagree with the decision.

32. How do we terminate voluntary coverage?
Voluntary coverage must remain in effect for a minimum of two full calendar years. A request for termination by the employer must be in writing and postmarked by January 15, immediately following the end of the last year of desired coverage.

33. Our corporate officers were automatically covered under prior law, and we never submitted a Voluntary Election Form when the law changed at the end of 2013. What do we have to do?
If you have been covering your corporate officers for more than two years, and no longer wish to cover your corporate officers, you do not need to do anything. Their coverage will automatically end December 29, 2013.

34. We submitted a Voluntary Election Form several years ago, but no longer want to cover our corporate officers. What do we have to do?
If you have been covering your corporate officers for more than two years and no longer wish to cover your corporate officers, you do not need to do anything. Their coverage will automatically end December 29, 2013.

35. We submitted a Voluntary Election Form several years ago. We still want to cover our corporate officers. What do we have to do?
You need to submit a new Voluntary Election Form listing your current corporate officers. It is important to ensure we have updated records of your corporate officers. If you have questions or concerns, please contact our Registration and Rates Unit at status@esd.wa.gov or 360-902-9360.

36. What if we send a request for termination of coverage after January 15? 
If the request to terminate coverage is postmarked or faxed after January 15, the coverage will continue through December 31 of that year. The request will be processed if not rescinded by the corporation, and will take effect January 1 of the following year.

If you miss the January 15 deadline, you must continue to report and cover your corporate officers for the remainder of the calendar year.

(back to top)

Section 9: Reinstatement of coverage

37. If corporate officers who have been covered for the mandatory two-year period have their coverage terminated, how soon can coverage be reinstated? 
The corporate officers could begin coverage in the subsequent quarter after termination of coverage if a Voluntary Election Form is submitted to us by the first day of the last month of that quarter and we approve the request.

38. What if our non-covered corporate officers change?
You must submit any changes in corporate officers on the Update Ownership Information form (EMS 5208C-2) (PDF, 501KB) with your quarterly tax reports. If you have not voluntarily requested to cover your corporate officers, any new corporate officers should also be treated as exempt.

You also may have people who are already corporate officers cease to be a corporate officer. If your former corporate officer continues to work for your business as a regular employee, start reporting that person as you would any other employee. If your former corporate officer stops working for your business altogether, go to question 41 to see if that person could be entitled to unemployment benefits.

If you now wish to voluntarily request to cover your corporate officers, see question 5.

39. What if our covered corporate officers change?
You must submit any changes in corporate officers on the Update Ownership Information form (EMS 5208C-2) (PDF, 501KB) with your quarterly tax reports.

If you already voluntarily requested to cover your corporate officers, any new corporate officers also will be covered, and you must report and pay taxes on their wages. If you have not voluntarily requested to cover your corporate officers, you should treat any new corporate officers as exempt.

You also may have people who are already corporate officers cease to be a corporate officer. If your former corporate officer continues to work for your business as a regular employee, start reporting that person as you would any other employee. If your former corporate officer stops working for your business altogether, go to question 41 to see if that person could be entitled to unemployment benefits.

40. What about any taxes owed for reinstated officers?
Your company is responsible for any taxes, penalties and interest due if coverage is reinstated.

(back to top)

Section 10: Benefits

41. Are there special rules for when corporate officers may receive unemployment benefits?
Yes. There are special rules that apply only when a corporate officer owns 10 percent or more of the corporation or is a family member (related by blood, marriage or domestic partnership as parent, stepparent, grandparent, spouse, domestic partner, child, brother, sister, stepchild, adopted child or grandchild) of another corporate officer who owns 10 percent or more of the corporation. In those circumstances, the corporate officer may not be eligible for unemployment benefits unless the officer resigns, is permanently removed as a corporate officer or if the corporation dissolves. See WAC 192-310-190 for more details.

42. Can a corporate officer who owns 10 percent or more of a corporation (or has a family member who also is a corporate officer owning 10 percent or more of the same corporation) receive benefits while still a corporate officer of a corporation that has not dissolved? 
Yes, for claims that take effect after December 29, 2013, if the corporate officer is otherwise eligible for unemployment benefits and the total wages received by the corporate officer from the corporation are less than 25 percent of the total base-year wages.

43. Our officers were previously covered in past quarters. They have enough wages from the covered period to be eligible for benefits. Our corporation has not elected to cover our officers now. Are our officers eligible for benefits?
Yes. Covered wages in the corporate officer’s base year (the first four of the last five completed calendar quarters) can be used to establish a claim. Their claims will be based on the wages that were reported while covered.

44. Our Voluntary Election Form was approved by Employment Security, and we want to put our corporate officers on standby. Are they eligible for benefits?
Corporate officers may be placed on standby if they meet all the criteria of WAC 192-110-015 – most importantly, up to four weeks with a definite return-to-work date, immediately available for work offered by the employer, and employer verification of the employee’s request for standby.

(back to top)

Section 11: Newly formed corporations and corporations new to Washington

45. How do new corporations cover corporate officers?
New for-profit corporations that wish to cover their corporate officers must submit a Voluntary Election Form (PDF, 80KB). Information on the form must match corporate registration information on file in order to process the request for coverage. See question 46 immediately below for the deadlines for new corporations to submit voluntary-coverage requests.

Note: Corporations doing business in Washington must register with the Secretary of State, then complete a state Business License Application. This applies if you are a newly formed corporation or a corporation newly doing business in Washington. If you have employees or plan to employ people within 90 days, you must register with us as part of the Business Licensing Service process.

46. What are the deadlines for new corporations to file a Voluntary Election Form? 
We must receive your request by the last day of the month following the end of the quarter in which you registered for coverage to take effect during that quarter.

For example, for the first quarter of 2014, the deadline for the Voluntary Election Form (PDF, 80KB) is the last day of April.

(back to top)

Section 12: Newly elected or replaced corporate officers

47. What happens if we elect new corporate officers or replace officers during the year?
You’re required to inform us whenever there is a change in corporate officers, using the Update Ownership Information form (EMS 5208C-2) (PDF, 501KB). If all your corporate officers were covered prior to the election, we will cover your new corporate officers unless you request to end coverage under state law RCW 50.24.160. (See question 32.)

(back to top)

Section 13: Out-of-state corporate officers

48. If my corporate officers are out-of-state (i.e., they do not work in Washington and are subject to the unemployment laws of other states or Canadian provinces), can we request to cover them?
No. Typically, if they do not work in Washington, corporate officers would not have to be reported for unemployment purposes in Washington.

The same rules apply for corporate officers as other workers in determining where they work.

(back to top)

Section 14: Miscellaneous

49. If we report wages and pay taxes on our officers, but do not submit a Voluntary Election Form, can we file an amended return and get a tax refund?
Yes. If you report in error, you have up to three years to file an amended return. You would then need to request a refund.

50. If we declare all employees as corporate officers, can we avoid paying unemployment insurance taxes?
If your employees do not meet the definition of corporate officers, they can’t be declared to be corporate officers to avoid unemployment taxes.

51. Can our corporation request coverage then decide to opt out?
Not for two full calendar years after you have written approval of requested coverage, as provided in state law.

52. Under the corporate officer law that took effect December 29, 2013, do we still have to register our corporate officers?
Yes. A different law requires corporations to register corporate officers with us.

Registration information includes names, addresses, titles, phone numbers, dates of birth, Social Security numbers and percentage of ownership for all corporate officers, regardless of whether they earn wages in Washington.

We will not process requests for coverage of corporate officers unless the information matches your corporate-registration information. To update corporate-registration information, you must submit the Update Ownership Information form (EMS 5208C-2) (PDF, 501KB).

53. If we have corporate officers, but no employees, can we cover our corporate officers?
Yes. A corporation with no employees may apply for coverage with the Voluntary Election Form (PDF, 80KB).

(back to top)