Under the PA UC Law, the term "employee" is presumed to apply to every individual who performs services for payment. Unless specifically excluded from coverage, all work for which payment is made under any contact of hire, express or implied, written or oral, including work performed in interstate commerce or as an officer of a corporation, is covered by the Law.
Certain types of employment and payments are specifically excluded from coverage under the UC Law.
Corporate Officers
The PA UC Law defines "wages" as "all remuneration paid to an individual with respect to his employment...". Any payment, including profits, given to an officer of a corporation for services performed are covered wages under Section 4(l)(1) of the PA UC Law, which defines "employment" as "all personal service performed for remuneration by an individual ... including service ... as an officer of a corporation." There is no distinction between officers of an S corporation and a C corporation.
Any payment made to an officer for services performed are wages for PA UC tax purposes and must be included in gross and taxable wages on the quarterly report for unemployment compensation.
More Important Information
Uniform Definition of Employment
The goal of the uniform definition of employment is to cover under one state law all the service performed for one employer by an individual, wherever it is performed. The following guidelines for applying the law are recommended.
First, determine whether the service is localized in any state. In other words, is all or most of the service performed in one state. Only if the service is not localized in any state is any other test necessary. If the service is not localized, it is necessary to determine in what state the individual's base for operations is located, and whether the individual performs any service in that state.
If the individual has no base for operations or if no service is performed in the state where the base for operations is located, then it is necessary to look to the state where the individual's service is directed or controlled. It is only when coverage is not determined by any of these tests that residence becomes a factor.
It may be necessary to apply four tests to determine the state of coverage.
- Localization of Service
- Base of Operations
- Place of Direction and Control
- Residence
Please refer to the Localized and Non-Localized Employment Pamphlet UCP-7 (PDF) or contact Employer Tax Services at 866-403-6163 for more information.
All employers providing covered employment whether full and/or part-time must register with the Office of Unemployment Compensation Tax Services (UCTS). To register, visit http://mypath.pa.gov to file a PA Online Business Tax Registration.
Voluntarily Elected Coverage
Any employer not subject to the PA UC Law has the option of voluntarily requesting coverage, although UCTS must approve the request before coverage is extended. Upon approval, the elected coverage is binding on the employer for not less than two years. To request coverage, an employer must file an application with UCTS.
The "Catch-All Clauses" Under FUTA
Section 4(x)(6) and Section 4(l)(6) of the PA UC Law have been termed the "catch-all clauses." These provisions state that regardless of the exceptions contained within the PA UC Law, services and payment for services performed which are considered covered employment under the Federal Unemployment Tax Act (FUTA) will also be considered covered employment under the PA UC Law.