How to Determine Your WA L&I Tax Category

In Washington, businesses with employees must contribute to the state’s workers’ compensation insurance fund, managed by the Department of Labor & Industries (L&I). This system provides benefits to workers who are injured or become ill on the job. The amount a business pays in taxes, or premiums, is tied to specific L&I risk categories and is a standard cost of doing business in the state.

The compliance process involves determining your business’s risk classification, understanding the corresponding insurance rate, and accurately reporting employee hours each quarter. Navigating these steps ensures a business meets its legal obligations and contributes to the statewide insurance pool that funds medical care and wage replacement for injured workers.

Determining Your L&I Risk Classification

The foundation of your L&I tax obligation is the “risk classification” assigned to your business. Washington’s system uses over 300 distinct classifications based on the specific type of work your employees perform, not the general industry of your company. L&I determines these classifications by analyzing the hazard level of different job duties, which groups businesses with similar operational risks together to distribute costs equitably.

When you apply for a business license and establish an L&I account, underwriters assign risk classifications based on the activities you describe. You can find your assigned classification or explore potential ones using the “Risk Class Lookup” tool on the L&I website. This tool allows you to search for classifications that match your employees’ work and see the associated base rates.

A single business can have multiple risk classifications. For example, a construction company will have a high-hazard risk class for its job site workers and a separate, lower-risk classification for its administrative office staff. Misclassifying employees can lead to significant over or underpayment of taxes.

For new businesses, the initial risk classification is assigned during the business registration process based on your description of operations. If your business operations change or expand, you may need to have your risk classifications reviewed and updated. You can contact L&I directly to discuss changes in job duties to ensure your classifications remain accurate.

Understanding L&I Premium Rates

Once your risk classifications are established, the next step is to understand the associated premium rates. Your total L&I premium is calculated on a per-hour basis for each employee. The rate itself is a composite of several components, starting with a base rate for each risk class that reflects the historical costs of claims for that type of work.

This base rate is then adjusted by your company’s individual claims history. A flat rate for the Supplemental Pension Fund, which covers cost-of-living adjustments, is also added to determine the final premium. This total premium is split between an employer portion and a smaller employee-paid portion.

Your company’s claims history introduces the Experience Modification Rate (EMR), a multiplier L&I assigns to your business. The EMR adjusts your premium based on your claims performance compared to other businesses in your risk class. An EMR of 1.0 is average; a better-than-average claims history results in an EMR below 1.0 and a discount, while a history of costly claims leads to an EMR above 1.0 and higher premiums.

L&I calculates your EMR using a three-year period of your claims history, which influences your rates for the upcoming calendar year. This means a workplace injury can affect your premium costs for several years. By managing workplace safety and implementing return-to-work programs, a business can influence its EMR and lower its L&I tax burden.

Required Information for L&I Reporting

To file your quarterly report accurately, you must gather several pieces of information beforehand. This preparation helps ensure compliance and avoid potential penalties.

You will need the following:

• Your business’s Unified Business Identifier (UBI) number.
• Your L&I-specific account ID.
• A complete record of every employee, including their full name and Social Security number.
• The total number of hours worked by each employee within the quarter, segregated by the specific L&I risk classification that applies to the work performed.

If an employee performs duties that fall under multiple risk classes, you must track and report the hours for each class separately. This requires meticulous timekeeping with clear distinctions for different job tasks.

How to Report and Pay Your L&I Taxes

Washington L&I requires employers to file a report every quarter, even if no employees worked or no wages were paid during that period. Missing the filing deadlines can result in late fees and interest charges.

Quarterly reporting deadlines are tied to the calendar quarter.

• The first quarter report (January-March) is due by April 30.
• The second quarter report (April-June) is due by July 31.
• The third quarter report (July-September) is due by October 31.
• The fourth quarter report (October-December) is due by January 31.

If a due date falls on a weekend or holiday, the deadline shifts to the next business day.

The most efficient way to file is through L&I’s online portals. The “QuickFile” service allows you to file without a registered account, while the “Claim & Account Center” is a secure portal for more comprehensive account management. In either system, you will enter the total hours worked for each employee under the appropriate risk class codes.

Once you have entered all the data, the online system will automatically calculate the premium you owe. You can then review the total and submit your payment electronically using an eCheck or a credit/debit card. Alternatively, you can mail a check with the payment voucher from your paper report to the L&I address specified on the form.