The state unemployment tax, also called the state payroll tax or simply ‘SUTA,’ is a payroll tax you pay into your state’s unemployment benefits fund. If one of your employees ever gets laid off and starts collecting state unemployment insurance, it’s likely that money will come from your state’s State Unemployment Tax Act fund.
SUTA is different from the FUTA tax (i.e. the Federal Unemployment Tax Act) which is a payroll tax employers must pay to the federal government.
Who pays the SUTA tax?
Any U.S.-based business with employees must pay SUTA. The moment you hire your first employee and register as an employer with your state, you’ll have to start making SUTA payments.
In most cases the employer pays SUTA. In Alaska, New Jersey, and Pennsylvania, however, SUTA is partially garnered from an employee’s wages as well.
How often is SUTA tax paid?
Most states require that you pay SUTA every quarter of the calendar year.
In California, for example, quarterly returns for SUTA and other state payroll taxes are due on April 30th, July 31st, October 31st and January 31st.
Make sure to check your state’s tax authority (links below) for exact dates.
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How do I register for a SUTA account?
The moment you hire your first employee, the IRS and your state consider you an employer.
This means that in addition to getting an Employer Identification Number (EIN), registering for workers’ compensation insurance and paying certain local taxes, you have to sign up for a SUTA tax account with your state tax authority.
If you’re based in California, for example, you have to start paying SUTA once you’ve paid an employee more than $100 in a calendar quarter.
You’ll pay SUTA to the California Employment Development Department (EDD), which you can register with online using EDD’s e-Services for Business.
How to calculate the SUTA tax
To calculate your SUTA tax payments, you need to know two things:
- your ‘taxable wage base’ per employee
- your state unemployment tax rate
These amounts vary by state, and they’re subject to change.
Each state usually has a standard SUTA tax rate for new employers. If you’ve been an employer for a while (i.e. an ‘experienced’ employer) your state might increase or decrease your company’s individual SUTA tax rate, depending on how many of your former employees file for unemployment
SUTA Tax Calculation Example
Let’s say you run a business in California with three employees. For 2020, the taxable wage base (or ‘taxable wage limit’) in California is$7,000 per employee, and the average SUTA tax is 3.4%.
That means that in 2020, you’ll pay:
$7,000 per employee x 3 employees x 3.4% = $714 in SUTA tax
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SUTA rates and wage bases by state for 2021
Because SUTA tax rules vary so much by state, we highly recommend checking your state tax authority’s website to get clear on your state’s SUTA tax rules, rates and wage base.
Here are links to each state’s tax authority, along with SUTA tax rates and wage bases for each state.
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