What is SUTA?

• State Unemployment Tax Act (SUTA) is imposed by each state on a base wage per employee, per year.
• Most states require only employers to pay SUTA, except Alaska, New Jersey, and Pennsylvania (where employees also contribute).

Key Components:

• Employer registers with the respective state where the work is performed.
• Wage Base: The maximum amount of wages per employee subject to SUTA.
• Tax Rate: Assigned based on industry, experience, and history. Updated annually (some states mid-year).
• New Employer Rate: A default rate until sufficient wage history is accumulated.

Reporting: Employers file quarterly reports detailing contributions, gross wages, and taxable wages.

Overview:

• SIT is imposed on employee earnings unless the employee works in a no-income-tax state:
• No SIT States: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.

Process:

• Employer registers with the state where the work is performed.
• Each state issues its own version of the W-4 form.
• Payroll software calculates withholdings once proper state and employee information is entered.

General Rule:

• Employers must withhold taxes for the state where the work is performed.
• Employees may be liable for taxes both where they work and where they reside.

How It Works:

• Employees pay the higher of the two combined rates.
• Example: Work state = 7%, Resident state = 10% → Employee pays 7% to the work state and 3% to the resident state.

Employer Best Practices:

• Some employers withhold only the work state tax and leave the remaining responsibility to the employee.
• Others may withhold both work and resident state taxes when permitted or required.
• Recommended to notify employees to avoid unexpected year-end tax bills.

Concept: Allows employees working in one state but residing in another to pay only their resident state's income tax.

Requirements: Employees must complete a reciprocity form to be exempt from work state withholding.

Sample States with Reciprocity:

Overview:

• Around 15 states impose local income taxes (city, county, or school district level).

Common States: Alabama, Arkansas, Colorado, D.C., Delaware, Iowa, Indiana, Kentucky, Maryland, Michigan, Missouri, New York, Ohio, Oregon, Pennsylvania.

Complex States: Pennsylvania and Ohio due to varying local rates and PSD codes.

• Remote Employees: If remote work is for the employee's convenience, taxes may still apply based on the employer's state. Confirm with a CPA if registration in another state is needed.
• New Jersey vs. New York: NJ residents working in NY pay only NY taxes. Usually, no NJ liability arises due to NY's higher rates.
• Reimbursable Employers (Nonprofits): 501(c)(3) organizations may elect to reimburse the state instead of paying unemployment taxes upfront.
• SUI Exempt Employees: Employees performing religious services may be marked as SUI-exempt if applicable.

Employer Responsibilities:

• Register for applicable state and local payroll taxes before paying wages.
• Ensure registrations are completed correctly and IDs are shared with the payroll processor.

Registration Steps:

1. Identify applicable taxes (SIT, SUI, Local).
2. Complete the necessary state forms (combined or separate depending on the state).
3. Obtain official state-issued IDs.
4. Provide IDs to the payroll provider.

Our Role:

• We provide forms and general guidance but do not handle registrations directly.
• Once IDs are received, we set up payroll taxes, process POAs if applicable, and begin proper withholding and filing.