This section can help you understand which workers and what types of wages and payments you need to report. Select one of the subjects below to go directly to your area of interest or scroll down to view all.
- Employees to Report
- Employees Not to Report
- Types of Payments
- Taxable Wage Limit
- Independent Contractors
- Probationary Employment
- Reporting to the Proper State
- FUTA Tax
Employees to Report
You must report all employees who perform services deemed “covered employment”— this means any services performed by an individual for remuneration (pay) under any contract of hire, unless otherwise specifically excluded under the Missouri Employment Security Law. Covered employment includes:
- Services of part-time, temporary, and casual workers, as well as regular workers;
- Officers or stockholders who perform services for a corporation and receive remuneration (pay);
- Services of agent or commission drivers who personally distribute food and beverage products (other than milk) or who distribute laundry or dry cleaning for another person;
- Services of traveling or city salespersons, engaged on a full-time basis, soliciting orders on behalf of an employer of merchandise for resale or supplies for use in a business operation; and
- Services performed in a foreign country by an American citizen for an American employer located in Missouri.
If you are liable to pay unemployment taxes and have any “covered employment,” you are required to post a “Notice to Workers Concerning Unemployment Benefits” in an accessible location.
Employees Not to Report
- The delivery and/or sale of newspapers when one of the following applies:
- Wages to persons under the age of eighteen who deliver newspapers or shopping news are not reportable or taxable for state and federal unemployment taxes. This exemption applies to the typical house-to-house newspaper delivery or sale, and also extends to passing out handbills and other similar types of advertising material on the street. The exemption also covers remuneration (pay) for services incidental to the delivery of the newspapers, such as assembling the sections into complete papers. This exemption does not include the distribution of magazines or house-to-house distribution of merchandise samples for advertising purposes.
- Wages paid to an individual of any age for services performed as a direct seller in the trade or business of delivering or distribution of newspapers or shopping news are not reportable for state or federal unemployment taxes.
- Newspaper or magazine vendors of any age are excluded from state and federal unemployment taxes for services performed at the time of sale of the papers or magazines to the ultimate consumer. This is true even if the person is guaranteed a minimum amount of compensation and/or can sell back all unsold newspapers or magazines.
- Services performed as a direct seller who is engaged in the trade or business of the delivering or distribution of newspapers or shopping news, including any services directly related to such trade or business or services, or services or a direct seller who is engaged in the business or trade of selling or soliciting sales of consumer products in a home, or otherwise than in or affiliated with a permanent fixed retail establishment (such as cookware, cosmetics, and the like) if 80 percent of remuneration (pay) received is directly related to such sales rather than the number of hours worked and sales are performed under a written contract that provides the seller will not be treated as an employee for federal tax purposes;
- Services performed in the employ of a son, daughter, spouse, or by a child under the age of 21 in the employ of the child's father or mother. This includes legally adopted, step-, and foster children and parents. If the business is a partnership, an exempt family relationship must exist between the worker and each partner in order for this exemption to apply. The exemption for family employment does not apply to the family of the officers or stockholders of a corporation;
- Services as a licensed insurance agent or an insurance solicitor remunerated (paid) solely by commissions;
- Services for which academic credits are given and which are performed by an individual who is a student enrolled in a public or nonprofit school;
- Services performed in the employ of a foreign government;
- Services of a licensed real estate salesperson or broker, provided that substantially all of remuneration for services are directly related to sales performed or other output rather than the number of hours worked, and the services are performed under a written contract that provides the individual will not be treated as an employee for federal tax purposes. Prior to August 28, 2010, services of a licensed real estate salesperson or broker, provided that at least 80 percent of remuneration (pay) for services are directly related to sales performed rather than the number of hours worked, and the services are performed under a written contract that provides the individual will not be treated as an employee for federal tax purposes;
- Services performed by an individual in a barber or beauty shop who pays rent or other payments to the owner or operator for use of the facilities;
- A motor carrier whose operations are confined to a commercial zone or who is regulated by the Missouri Department of Transportation or by the U.S. Department of Transportation or any of its sub-agencies shall not be considered the employer of a lessor of its vehicle or of a truck driver paid by a lessor. Also excluded are services performed by owners who drive their own trucks for a contract or common carrier;
- Workers covered by a federal unemployment insurance system (railroad workers and federal employees); or
- Full-time students working less than 13 weeks for an organized summer camp.
Churches and Religious Orders
- Services performed in the employ of a church, or convention or association of churches;
- Services performed in the employ of an organization which is operated primarily for religious purposes and which is operated, supervised, controlled, or principally supported by a church, or convention or association of churches;
- Services performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of the ministry; and
- Services performed by a member of a religious order in the exercise of duties required by such order.
501(c)(3) Organizations and Governmental Entities
- Services performed by individuals whose earning capacity is impaired by age or physical or mental deficiency or injury, if performed in a facility conducted for carrying out a program for rehabilitation of such individuals;
- Services performed by individuals who, because of injury, physical or mental capacity cannot be readily absorbed in the competitive labor market, if performed in a facility whose purpose is to carry out a program of providing work for such individuals;
- Services performed by an individual receiving work-relief or work-training if the program is assisted or financed in whole or in part by a federal agency or by an agency of the state or any of its political subdivisions;
- Services performed in the employ of a nonprofit school, college or university by a student who is enrolled and regularly attends classes at such school, college or university;
- Services performed by a student's spouse in the employ of a nonprofit school, college or university at which the student is enrolled and regularly attends classes provided the spouse is advised at the beginning of such services that:
- The employment is provided under a student-assistance program; and
- The employee is not covered by any program of unemployment insurance.
- Services performed by an inmate of a custodial or penal institution; and
- Services performed in the employ of a governmental entity if such service is performed by an individual in the exercise of duties:
- As an elected official;
- As a member of a legislative body or a member of the judiciary of a state or political subdivision;
- As a member of the state national guard or air national guard;
- As a temporary employee due to fire, storm, snow, earthquake, flood, or similar emergency;
- In a position designated by Missouri laws as a major non tenured policymaking or advisory position;
- In a position designated by the Missouri laws as a policymaking or advisory position in which the duties ordinarily do not require more than eight hours per week;
- As an election judge appointed by the election authority.
Missouri law exempts from coverage services performed in the employ of a son, daughter or spouse or by a child, stepchild, or foster child under the age of 21 in the employ of the child's father or mother. This includes legally adopted, step, and foster children and parents.
When the employing unit is a sole proprietorship, the services performed by the owner's parents, spouse and children under the age of 21 are not covered by state unemployment insurance.
If the business is a partnership, or a limited liability company taxed as a partnership, an exempt family relationship must exist between the worker and each partner in order for this exemption to apply. The qualifying relationship does not have to be the same for all partners/members.
Rebecca and Joseph, a mother and her natural-born son, operate a partnership. Rebecca's husband, who is also Joseph's father, works for the partnership. His wages are not reportable because he has a qualifying relationship with both partners (as Rebecca's spouse and Joseph's father). Joseph's wife also works for the partnership. Her wages are reportable because she does not have a qualifying relationship with one of the partners (she is Joseph's spouse but she is Rebecca's daughter-in-law, not Rebecca's natural, adopted, step, or foster daughter under the age of 21).
The exemption for family employment does not apply to corporations.
Required Notice to Non-Covered Workers
If an employee of a church, religious order, or 501(c)(3) (not for profit) organization is exempt from unemployment insurance coverage as defined under Employment Security law, Missouri Revised Statutes section 288.041 requires a written notice from the employer to the exempted worker. The notice must state that wages earned by the individual will not be used to determine insured worker status for unemployment benefits. The notice must be provided to each exempt individual at the time of initial hire or upon a change in the employing unit's status regarding liability for unemployment insurance coverage.
Types of Payments
Reportable wages include gross payments plus the reasonable cash value of any goods or services which the employee receives for work performed in lieu of money. These are called “in-kind” wages (meals receive special treatment). Bonuses, commissions, vacation pay, holiday pay and termination pay are wages. Tips received from persons other than the employing unit are wages to the extent required to be reported under the Federal Unemployment Tax Act.
Meals are usually not reportable as wages if they are provided by the employer to the worker for the employer's convenience and on the employer's premise, unless they are required to be reported under the Federal Unemployment Tax Act, 26 U.S.C. Section 3306. Meals are never reportable for agricultural and domestic employees.
Special Rule for Agricultural and Domestic In-Kind Payments
The values of considerations other than cash are not reportable for domestic and agricultural employees. For instance, if a domestic employee receives room, board and $1,000 per month cash as payment for services, only the monetary payments are reportable as wages.
Specific Wage Categories
A cafeteria plan is a voluntary plan which gives an employee the choice of converting part of his/her wages into benefits which are free from income tax. Payments to cafeteria plans come from employee and employer contributions.
Contributions to a cafeteria plan paid by an employee and/or employer for qualified benefits are not reportable if such payment would not be wages for Federal Unemployment Tax. These qualified benefits can be payments to an accident and health plan, group term life insurance premiums and dependent care assistance benefits up to the limits set by the Federal Unemployment Tax Act.
Health Plans and Medical Payments
The Missouri Employment Security Law exempts from wages payments made by an employer to or on behalf of a worker for medical or hospitalization expense or death, including payments made into a fund, annuity, or for insurance for these purposes, provided such payments are made under a plan that applies to all workers or a class of workers. Payments made to an employee for income replacement due to sickness or disability would be wages unless made under a workers' compensation law award. In the case of such payments, if the third party who made the payments to the employee makes an accounting to the employer, the employer must report the amounts. Otherwise, the third party must report the amounts to the DES.
The law further exempts from wages any payments on account of sickness, accident, disability, or medical or hospitalization expenses that are made by an employer to or on behalf of an individual after the expiration of six calendar months following the month an individual last worked, regardless if such payments were made under a health care or disability plan or a workers' compensation law award.
Employee Payments to a Plan
Employee payments (salary deductions, for instance) to any retirement plan are reportable as wages.
Employer Payments to a Plan
Whether employer payments to a retirement plan are reportable depends on whether or not the retirement plan is a qualified plan. Employer contributions to a qualified plan are not reportable as wages. Employer contributions to a non-qualified plan are reportable as wages.
Qualified Retirement Plans
A qualified retirement plan is a written plan which an employer has established for the exclusive benefit of his or her employees and their beneficiaries.
The Internal Revenue Service (IRS) can issue a determination or an opinion letter regarding a plan's qualifications, for a fee. An employer may adopt a master or prototype plan instead of setting up its own original plan.
Examples of plans which may be qualified plans:
- 401-K plan
- An IRS-approved profit sharing or stock bonus plan for a grade or class of workers
- Deferred compensation plan
- Money purchase pension plan
- Simplified Employee Pension (SEP) plan
- Keogh or HR-10 plan
Taxable Wage Limit
There is a limit on the amount of wages paid to an individual worker in a calendar year on which each employer must pay a tax. This limit is known as the taxable wage limit or taxable wage base. See the table of taxable wage bases for prior years, or see:
Related Links: Example calculation of excess wages
No tax is required on that part of wages paid to a worker by an employer or its predecessor during a calendar year which exceeds the taxable wage limitations for such year. However, all wages must be reported for benefit purposes.
The taxable wage base can be increased by $1,000 or decreased by $500 for any year, depending on the average balance of the Unemployment Compensation Trust Fund of the four preceding calendar quarters. In no event shall the state taxable wage base increase beyond $13,000, or decrease to less than $7,000.
The determination of whether an individual is an employee or independent contractor is important for several reasons for Missouri unemployment tax purposes.
- Under Missouri law, wages paid to employees are subject to employment taxes paid by the employer.
- Only compensation paid to employees is used to calculate unemployment benefits for that employee should he/she become unemployed through no fault of his/her own.
If an employer has individual(s) performing services in connection with its business operations who are not considered employees, the employer has the responsibility to contact the DES for a ruling on the workers' employment status.
Any agreement by an individual to waive rights to unemployment insurance coverage is void under the Missouri Employment Security Law.
The DES applies the twenty-factor test originally developed by the IRS to determine whether particular workers are employees or independent contractors. The twenty factors do not serve as a bright-line rule to be applied without flexibility, but rather are guides or aids to be used in determining the nature of the employment relationship. They will not necessarily be the only factors to consider in a particular case. No single factor is conclusive, and some factors may be more important than others depending on the industry involved and the context in which the services are performed. The focus of the DES inquiry is the degree to which the employer has the right to control the manner and means of a worker’s performance.
A Missouri court, in National Heritage Enterprises, Inc. v. Division of Employment Sec., 164 S.W.3d 160, 167-74 (Mo. App. W.D. 2005), has identified and described the twenty factors as follows:
- Instructions. A worker who is required to comply with other persons’ instructions about when, where, and how he or she is to work is ordinarily an employee. This control factor is present if the person or persons for whom the services are performed has the right to require compliance with the instructions. With respect to the “instructions” factor, the right to control is manifested in control over the “when, where, and how” work is completed.
- Training. Training a worker by requiring an experienced employee to work with the worker, by corresponding with the worker, by requiring the worker to attend meetings, or by using other methods, indicates that the person or persons for whom the services are performed want the services performed in a particular method or manner.
- Integration. Integration of the worker’s services into the business operations generally shows that the worker is subject to direction and control. When the success or continuation of a business depends to an appreciable degree upon the performance of certain services, the workers who perform those services must necessarily be subject to a certain amount of control by the owner of the business.
- Services Rendered Personally. If the services must be rendered personally, presumably the person or persons for whom the services are performed are interested in the methods used to accomplish the work as well as the results.
- Hiring, Supervising, and Paying Assistants. If the person or persons for whom the services are performed hire, supervise, and pay assistants, that factor generally shows control over the workers on the job. However, if one worker hires, supervises, and pays the other assistants pursuant to a contract under which the worker agrees to provide materials and labor under which the worker is responsible only for the attainment of a result, this factor indicates an independent contractor status.
- Continuing Relationship. A continuing relationship between the worker and the person or persons for whom the services are performed indicates that an employer-employee relationship exists. A continuing relationship may exist where work is performed at frequently recurring although irregular intervals.
- Set Hours of Work. The establishment of set hours of work by the person or persons for whom the services are performed is a factor indicating control.
- Full Time Required. If the worker must devote substantially full time to the business of the person or persons for whom the services are performed, such person or persons have control over the amount of time the worker spends working and impliedly restrict the worker from doing other gainful work. An independent contractor on the other hand, is free to work when and for whom he or she chooses.
- Doing Work on Employer’s Premises. If the work is performed on the premises of the person or persons for whom the services are performed, that factor suggests control over the worker, especially if the work could be done elsewhere. Work done off the premises of the person or persons receiving the services, such as at the office of the worker, indicates some freedom from control. However, this fact by itself does not mean that the worker is not an employee. The importance of this factor depends on the nature of the service involved and the extent to which an employer generally would require that employees perform such services on the employer’s premises. Control over the work is indicated when the person or persons for whom the services are performed have the right to compel the worker to travel a designated route, to canvass a territory within a certain time, or to work at specific places as required.
- Order or Sequence Set. If a worker must perform services in the order or sequence set by the person or persons for whom the services are performed, that factor shows that the worker is not free to follow the worker’s own pattern of work but must follow the established routines and schedules of the person for whom the services are performed.
- Oral or Written Reports. A requirement that the worker submit regular or written reports to the person or persons for whom the services are performed indicates a degree of control.
- Payment by Hour, Week, Month. Payment by the hour, week, or month generally points to an employer-employee relationship, provided that this method of payment is not just a convenient way of giving a lump sum agreed upon as the cost of the job. Payment made by the job or on a straight commission generally indicates that the worker is an independent contractor.
- Payment of Business and/or Traveling Expenses. If the person or persons for whom the services are performed ordinarily pay the worker’s business and/or traveling expenses, the worker is ordinarily an employee. An employer, to be able to control expenses, generally retains the right to regulate and direct the worker’s business activities.
- Furnishing Tools and Materials. The fact that the person or persons for whom the services are performed furnished significant tools, materials, and other equipment tends to show the existence of an employer-employee relationship.
- Significant Investment. If the worker invests in facilities that are used by the worker in performing services and are not typically maintained by employees (such as maintenance of an office rented at fair market value from an unrelated party), that factor tends to indicate that the worker is an independent contractor. On the other hand, lack of investment in facilities indicates dependence on the person or persons for whom the services are performed for such facilities and, accordingly, the existence of an employer-employee relationship. Special scrutiny is required with respect to certain types of facilities, such as home offices.
- Realization of Profit or Loss. A worker who can realize a profit or loss as a result of the worker’s services (in addition to the profit or loss ordinarily realized by employees) is generally an independent contractor, but the worker who cannot is an employee. For example, if the worker is subject to a real risk of economic loss due to significant investments or a bona fide liability for expenses, such as salary payments to unrelated employees, that factor indicates that the worker is an independent contractor.
- Working for More Than One Firm at a Time. If a worker performs more than de minimis services for a multiple of unrelated persons or firms at the same time, that factor generally indicates that the worker is an independent contractor. However, a worker who performs services for more than one person may be an employee of each of the persons, especially where such persons are part of the same service arrangement.
- Making Services Available to the General Public. The fact that a worker makes his or her services available to the general public on a regular and consistent basis indicates an independent contractor relationship.
- Right to Discharge. The right to discharge a worker is a factor indicating that the worker is an employee and the person possessing the right is an employer. An employer exercises control through the threat of dismissal, which causes the worker to obey the employer’s instructions. An independent contractor, on the other hand, cannot be fired so long as the independent contractor produces a result that meets the contract specifications.
- Right to Terminate. If the worker has the right to end his or her relationship with the person for whom the services are performed at any time he or she wishes without incurring liability, that factor indicates an employer-employee relationship.
If you have an employer-employee relationship, it makes no difference how it is labeled. The substance of the relationship, not the label, governs the worker’s status. It does not matter how the payments are measured or paid, what the payments are called, or if the individual is employed full time or part time. Employer and employing units are required by Section 288.130 of Missouri law to provide information in a worker relationship questionnaire.
For more information, you may download the pamphlet, “Classifying Employees for Unemployment Insurance Tax Purposes” (MODES-INF-310), or for Internal Revenue Service guidelines, click here.
An individual hired on a trial basis to fill a regular job should be reported as a probationary worker if such worker's period of employment did not exceed 28 consecutive days. The letter "P" and the beginning and ending dates of employment should be entered on the line the worker's name and wage amount are shown on the quarterly contribution and wage report. The wages should be included in total and taxable wages.
No charges will be made to a contributing employer's account for any benefit payments that are attributable to such wages. Reimbursable employers shall be liable for all benefit payments.
Reporting to the Proper State
An individual who performs all of his/her work within Missouri for an employer is a localized Missouri worker. Wages paid to localized workers must be reported to the state where the individual works, regardless of where the worker lives. Localized Missouri work could include occasional temporary work outside of the state that is incidental to an individual's regular work in Missouri.
An individual whose services are not localized in any one state is referred to as a multi-state worker. Missouri law (RSMo., Section 288.034.2) sets up a three-part test to determine to which state a multi-state worker should be reported. The parts of the test are to be applied in order, and if a worker satisfies any part of the test, no subsequent parts should be applied. A multi-state worker is reportable to Missouri if:
- The worker's base of operations is in Missouri.
Example: A truck driver performs significant service for her employer in Kansas, Missouri, Illinois, Indiana, and Nebraska. She departs from and returns to a terminal in Missouri. Because her base of operations is in a state in which she performs some service, her wages are reportable to Missouri.
- The person had no fixed base of operations in any state where services are performed, but the employer directed and controlled the person's services from Missouri.
Example: A construction worker is employed by a company that does work in several states. The company's headquarters is in Missouri. The worker performs significant services in Arkansas, Missouri, Illinois, Tennessee and Iowa. Because his base of operations moves from state to state (the construction sites), and he performs some service in the state which contains the point of direction and control (the headquarters), his wages are reportable to Missouri, the state which contains the point of direction and control.
- The person lived in Missouri and performed some services in Missouri, and the state of coverage cannot be determined by either of the first two tests.
Example: A salesman employed by an Oklahoma company lives in Missouri. His territory covers Missouri, Arkansas, and Kansas. He receives instructions and is directed and controlled from the Oklahoma office but performs no service in Oklahoma. Because he performs no service in the state where his base of operations and his point of direction and control are located, and he performs some service in the state which contains his residence, his wages are reportable to Missouri, the state in which he resides.
A base of operations is a fixed place where a person receives work instructions, makes reports, and normally departs to begin a tour of duty and returns when the tour is ended. It could be a worker's home or an employer's place of business where a worker reports with some regularity. It is not the place from where an employer directs, controls, and generally transmits instruction and information to a worker by mail or telephone. Some multi-state workers have no fixed base of operations.
All states subscribe to these same tests to determine the correct state of coverage for a multi-state worker.
Services performed outside the United States or Canada by a citizen of the United States for an American employer would be covered under the Missouri Employment Security Law if:
- The employer's principal place of business in the United States is located in Missouri; or
- The employer has no place of business in the United States, but
- The employer is an individual who is a resident of Missouri; or
- The employer is a corporation which is organized under the laws of Missouri; or
- The employer is a partnership or trust and the number of partners or trustees who are residents of Missouri is greater than the number who are residents of any other state; or
- None of the above criteria are met, and:
- The employer has elected coverage of the foreign workers in Missouri; or
- The employer has not elected coverage in any state and an individual files a Missouri claim for unemployment insurance benefits based on wages earned while working outside the United States.
Interstate Reciprocal Coverage Arrangement
When an employee's service is not localized in any one state and none of the above tests for multi-state workers apply, an employer can usually elect to cover the entire service of the worker in:
- Any state in which the person works;
- Any state in which the employer maintains a place of business; or,
- The state in which a worker lives.
The election must be filed with the state unemployment insurance agency to which the employer wants to report wages. Elections must be approved by all interested state agencies. Application forms are available for employers wishing to elect to cover services of multi-state workers with the DES.
Maritime Interstate Reciprocal Agreement
The purpose of the Maritime Agreement is to establish that services of officers and members of a vessel's crew engaged in interstate operations are covered for unemployment insurance purposes and to identify the state which will assume jurisdiction over such services.
The state of coverage in regard to maritime service performed by officers and crew on a vessel is the state in which the employer maintains the office from which operations of the vessel are ordinarily supervised, managed, and controlled. The state which assumes jurisdiction for coverage collects contributions and is responsible for payment of benefits.
In addition to state unemployment tax, the Federal Unemployment Tax Act (FUTA) imposes a payroll tax on employers also. The FUTA tax is reported on IRS Form 940. The federal tax is 6.2 percent of the first $7,000 paid to each employee. Learn more.