Is SUTA Paid by the Employer or the Employee?
Understand who is responsible for SUTA payments, how rates are determined, and key reporting requirements to ensure compliance with state unemployment taxes.
Businesses must contribute to various state and federal programs, including the State Unemployment Tax Act (SUTA), which funds unemployment benefits for eligible workers. Each state has its own SUTA regulations, making it essential for employers to understand their responsibilities, including tax payments, rate determinations, and reporting requirements.
Who Pays SUTA
Employers cover SUTA tax in nearly all states, with the funds supporting state unemployment insurance programs. Unlike federal payroll taxes, SUTA is not deducted from employees’ wages. However, Pennsylvania, New Jersey, and Alaska require both employer and employee contributions, with a small percentage withheld from paychecks.
The amount businesses owe depends on total wages paid and the state’s wage base limit—the maximum earnings subject to SUTA tax. In 2024, California’s wage base is $7,000, while Washington’s is $67,600. Once an employee’s earnings exceed this threshold, no further SUTA tax is due for that worker during the year.
How Contribution Rates Are Determined
SUTA tax rates vary based on an employer’s experience rating, which reflects their history of layoffs and unemployment claims. States calculate this rating by reviewing the number of former employees who received benefits and the total amount paid out. Businesses with frequent layoffs face higher rates, while those with fewer claims benefit from lower rates.
New employers without an experience rating receive a standard rate set by the state, often varying by industry. In 2024, Florida assigns new employers a 2.7% tax rate, while Texas starts at 2.7% but adjusts based on industry classification. Once a company has sufficient employment history, the state recalculates rates annually.
States may also adjust rates based on the financial stability of their unemployment insurance trust funds. If reserves are low, states can impose surcharges or solvency taxes, temporarily increasing employer contributions.
Reporting and Wage Base
Employers must file reports with their state workforce agency to document taxable wages and SUTA contributions. Most states require quarterly submissions through electronic systems like the State Information Data Exchange System (SIDES) or state-specific online portals. Reports include total wages paid, taxable wages, and calculated tax liability.
Accuracy is critical, as errors can lead to penalties or audits. Underreporting wages may result in fines or interest charges. Many states cross-check payroll records with IRS filings to identify discrepancies. Employers should maintain detailed payroll records to support their filings if audited.
Each state sets a wage base, determining the maximum earnings subject to SUTA tax. This threshold is adjusted periodically based on economic conditions and unemployment trust fund health. In 2024, New York’s wage base is $12,300, while Idaho’s is $49,900. Employers must stay updated on these changes to ensure accurate payroll tax calculations.
Handling Overpayments or Shortfalls
Errors in SUTA tax payments must be addressed promptly. Overpayments typically occur when employers miscalculate taxable wages or apply an incorrect tax rate. Most states allow businesses to request a refund or apply the excess to future liabilities. California permits refund claims using Form DE 678, while Texas allows credit carryforwards to offset subsequent tax obligations. Some states impose deadlines for refund requests, requiring timely action.
Shortfalls carry more severe consequences, including penalties and interest charges. Many states impose late payment fees based on the outstanding balance and duration of delinquency. New York applies a 10% penalty on unpaid SUTA taxes, plus daily accruing interest. Unresolved shortfalls may lead to liens or garnishments, affecting business operations. To prevent these issues, companies should reconcile payroll records regularly and use automated tax compliance software to detect discrepancies before filing.
Frequency of Payments
Employers must submit SUTA tax payments based on their state’s schedule, typically quarterly, with deadlines on April 30, July 31, October 31, and January 31.
Some states require more frequent payments for larger employers. Massachusetts mandates monthly payments for businesses with over $100,000 in annual unemployment tax liability, while Tennessee requires monthly deposits for those with at least $1,000 in monthly SUTA tax liability. Late payments result in penalties and interest charges, which vary by state. Florida imposes a 10% penalty on delinquent payments, while Illinois assesses 2% monthly interest on unpaid balances. Employers should monitor payment schedules and use automated payroll systems to ensure timely remittance and avoid penalties.