Understanding SUTA Tax and Wage Base

- Updated on May 07, 2020 - 11:00 AM by 123PayStubs Team

Its employers’ responsibility to withhold a certain amount for Federal and State income tax, FICA taxes such as social security and medicare tax, unemployment taxes such as FUTA and SUTA taxes.

What is SUTA?

SUTA, the State Unemployment Tax Act, is the state unemployment insurance program to benefit workers who lost their jobs. Employers contribute to the state unemployment program by paying SUTA tax every quarter, depending on the SUTA tax rate and the Wage Base. It is the employer's responsibility to withhold the tax and make payments.

In most states, it is the employer who contributes towards SUTA taxes. But in few states like Alaska, New Jersey, and Pennsylvania, the SUTA program requires contribution from both employers and employees.

Some states refer to SUTA as State Unemployment Insurance (SUI) or Reemployment Tax. Also, some states provide exemptions from paying SUTA tax for nonprofits and businesses which employ fewer employees.

SUTA Tax Rates and Wage Base Limit

  • Each state has its own SUTA tax rates and taxable wage base limit. The tax rates are updated periodically and might increase for businesses in certain industries that have higher rates of turnover.
  • SUTA tax rates will vary for each state. Each state has a range of SUTA tax rates ranging from (0.65% to 6.8%). Employers will receive an assessment or tax rate for which they have to pay.
  • Some states have their own SUTA wage base limit. The wage base limit is the maximum threshold for which the SUTA taxes can be withheld.
  • In case the employer starts a new business, the states provide a standard new employer SUTA rate. This rate will again change as the business grows, depending on the number of unemployment claims made to the state by workers who lose their jobs.

SUTA Tax Calculation

Employers must be aware of the taxable wage base per employee and the state unemployment tax rate to calculate the SUTA tax.

Each state has a standard SUTA tax rate for new employers, and it will be different for employers who are in the business for long. The table below shows the wage base limit and the SUTA rate for each state.

SUTA Tax Rate and Wage base Limit by State

State SUI New Employer Tax Rate Tax Rate Range for Experienced Employer State Wage Base Limit
Alabama 2.70% 0.65% – 6.8% $8,000
Alaska 1.28% 1.5% – 5.9% $41,500
Arizona 2.00% 0.05% – 6.42% $7,000
Arkansas 3.10% 0.3% – 14% $7,000
California 3.40% 1.5% – 6.2% $7,000
Colorado 1.7% to 5.94% 0.58% – 7.4% $13,600
Connecticut 3.40% 1.9% – 6.8% $15,000
Delaware 1.8% to 2.3% 0.3% – 8.2% $16,500
D.C. 2.70% 1.6% – 7% $9,000
Florida 2.70% 0.1% – 5.4% $7,000
Georgia 2.70% 0.4% – 8.10% $9,500
Hawaii 2.40% 0.01% – 5.6% $48,100
Idaho 1% 0.255% – 5.4% $41,600
Illinois 3.125% 0.625% – 7.25% $12,740
Indiana 2.50% 0.5% – 7.4% $9,500
Iowa 1.00% 0% – 7.5% $31,600
Kansas 2.70% 0% – 7.1% $14,000
Kentucky 2.70% 0.3% – 9.0% $10,800
Louisiana Varies 0.09% – 6.2% $7,700
Maine 1.86% 0% – 5.4% $12,000
Maryland 2.60% 0.3% – 7.5% $8,500
Massachusetts 2.42% 0.94% – 14.37% $15,000
Michigan 2.70% 0.06% – 10.3% $9,000
Minnesota Varies 0.20% – 9.1% $35,000
Mississippi 1.00% 0.2% – 5.4% $14,000
Missouri 2.376% 0% – 5.4% $11,500
Montana 1% to 2.4% 0% – 6.12% $34,100
Nebraska 1.25% 0% – 5.4% $9,000
Nevada 2.95% 0.25% – 5.4% $32,500
New Hampshire 1.20% 0.1% – 7% $14,000
New Jersey 2.80% 0.4% – 5.4% $35,300
New Mexico 0.33% to 5.4% 0.33% – 6.4% $25,800
New York 2.50% 0.6% – 5.76% $11,600
North Carolina 1.00% 0.06% – 5.76% $25,200
North Dakota 1.02% 0.08% – 9.69% $37,900
Ohio 2.70% 0.3% – 9.4% $9,000
Oklahoma 1.50% 0.1% – 5.5% $18,700
Oregon 2.10% 0.7% – 5.4% $42,100
Pennsylvania 3.69% 1.2905% – 9.9333% $10,000
Rhode Island 1.06% 0.9% – 9.4% $24,000
South Carolina 1.03% 0.06% – 5.46% $14,000
South Dakota 1.20% 0% – 9.35% $15,000
Tennessee 2.70% 0.01% – 10% $7,000
Texas 2.70% 0.31% – 6.31% $9,000
Utah Varies 0.1% – 7.1% $36,600
Vermont 1.00% 0.8% – 6.5% $16,100
Virginia 2.50% 0.11% – 6.2% $8,000
Washington Varies 0.13% – 5.72% $52,700
West Virginia 2.70% 1.5% – 12% $12,000
Wisconsin 3.05% - 3.25% 0% – 12% $14,000
Wyoming 1.22% 0.18% – 8.72% $26,400

How Employers can lower the SUTA Tax Rate

Employers dealing with frequent layoffs, and high employee turnover will have a higher SUTA tax rate as employees who lose their jobs will claim the unemployment benefits with the State. The lower the SUTA tax, an employer first needs to reduce the frequent layoffs and employee turnover.

When fewer workers claim unemployment benefits from the State due to job loss, the SUTA rate for the employer will be adjusted to a lower rate, thereby reducing the SUTA tax withholdings.

SUTA Tax for Self-Employed Individuals

Most of the states don’t have an unemployment program for independent contractors or self-employed individuals. Employers who hire that kind of person are not required to pay the unemployment tax for them.

Payment of SUTA tax to State

To pay the SUTA tax, the employer must have an unemployment tax account with the State. Only then the State will send details about the unemployment tax rate to the employer each year. The tax rate may vary each year, depending on the claim towards unemployment funds of the State.

Once the employer knows the SUTA tax rate to apply for their business, they are responsible for withholding and reporting their SUTA tax liabilities to the State every quarter.

Most of the states provide employers with an option to pay their taxes online. The employer must also report the deposited amount every quarter and submit an annual report for the same.

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