While many employers are familiar with federal payroll taxes like Social Security and Medicare, State Unemployment Tax Act (SUTA) requirements vary by state and can have a substantial impact on an organization’s bottom line.
Understanding SUTA tax is essential for maintaining compliance, avoiding penalties, and managing labor costs effectively. The following guide answers the most common questions about SUTA tax.
What is SUTA Tax?
SUTA tax is an employer-paid payroll tax used to fund state unemployment insurance programs. The tax provides temporary income to eligible workers who lose their jobs through no fault of their own.
SUTA vs SUI Tax: Are SUTA and SUI Tax the Same?
Yes, SUTA and State Unemployment Insurance (SUI) refer to the same tax. The terminology used varies by state and payroll provider, but both terms describe the tax employers pay to support state unemployment benefits.
Other Names for SUTA Tax
In addition to SUI, SUTA tax is also referred to as:
- State unemployment compensation
- Unemployment insurance tax
- Reemployment tax
What Are SUTA Tax Rates?
A SUTA tax rate is the percentage employers must pay on each employee’s wages to fund state unemployment insurance programs. This rate determines how much you owe in SUTA taxes and varies based on a company’s history and the state.
How Are SUTA Tax Rates Determined?
Each state sets a minimum and maximum SUTA tax rate and assigns individual rates to employers based on factors like industry classification, how long they’ve been in business, and their unemployment claims history.
New employers are typically given a standard rate, while experienced employers have a fluctuating rate depending on how many former employees have filed for unemployment benefits. A higher number of employees filing unemployment typically means the employer will pay more in SUTA tax.
Where Can I Find My SUTA Tax Rate?
You can find your current SUTA tax rate on the annual notice sent by your state’s unemployment agency. You can also access it through your state’s unemployment insurance agency website, your company’s unemployment insurance account portal, or through your payroll service provider.
SUTA Tax Rate FAQs
Can SUTA Tax Rates Change?
Yes, SUTA rates can change annually based on your company’s claims history and the financial health of your state’s unemployment fund. For accurate payroll planning, stay up to date on your SUTA rate.
Who Pays SUTA Taxes?
In most states, employers are solely responsible for paying SUTA taxes. However, a few states require employee contributions as well. Those states are:
- Alaska
- New Jersey
- Pennsylvania
Who is Exempt from Paying SUTA Tax?
Exemptions vary by state, but in general nonprofits, religious organizations, and government entities can be exempt. These groups would instead reimburse the state directly for unemployment claims paid to former employees.
How Do Employers Register for SUTA Taxes?
To register for SUTA, employers must apply with their state’s labor or unemployment agency. This is typically done online. After registration, the state assigns an employer account number and SUTA rate.
How Do Employers File SUTA State Taxes?
The process and timelines vary by state, but employers typically file SUTA taxes using their state’s reporting system. This involves submitting wage reports and paying the appropriate tax amount. Depending on the state, SUTA filing may be required monthly, quarterly, or annually. Late or incorrect filings can lead to penalties.
What if Employers Pay Too Much SUTA Taxes?
If you overpay your SUTA taxes, most states allow you to apply the excess toward a future payment or request a refund. Check your state’s refund policy and coordinate with your payroll provider if necessary.
What Happens if Employers Forget to Make SUTA Payments?
Missing a SUTA payment can lead to late fees, interest charges, and even penalties from your state. It can also impact your federal unemployment (FUTA) tax credit, increasing your overall tax burden.
How Paycor Helps with SUTA Taxes
Managing tax compliance requires close attention to detail, especially if you operate in multiple states. Using a payroll provider like Paycor Online Payroll Software offers stress-free tax compliance with local, state, and federal requirements.
The software provides in-product tax updates to notify you of any key changes. In addition, payroll reports provide visibility into tax liability.
Use Paycor For SUTA
Want to automate tax withholdings while ensuring accuracy? Paycor can help with that. We offer a dedicated support team with tax expertise as well as customer-exclusive resources to help you understand new laws. We also regularly update our HCM solution to reflect the latest changes and ensure compliance. Learn more with a guided product tour.