Staying on top of employment taxes is a critical part of processing payroll. Withholding the right amount of taxes from employee wages is a must, of course, but that’s not your only tax-related responsibility. Contributing employer-funded taxes like SUTA, or State Unemployment Tax Act, is equally important. However, unlike other taxes, SUTA doesn’t have a standard rate, so verifying it each year — and often reporting it to your payroll provider — is crucial.
What is SUTA?
First established in 1939 during the Great Depression, SUTA was created to help U.S. workers and boost the economy. Still around today, SUTA is a state-level payroll tax paid by all employers (and by employees in some states). SUTA funds are used to pay state unemployment insurance to employees who have become unemployed due to circumstances outside of their control (e.g., company layoffs). If you hear of people collecting unemployment, chances are they’re drawing from SUTA funds.
What do Payroll Data clients need to know about SUTA?
To inform you of your current rate, the states where you have employees should send you an annual notice containing important SUTA information, like your current SUTA rate(s) and filing frequency requirements. If your employees all work in Wisconsin, Payroll Data has your SUTA information and will update it in Orbit Payroll automatically — no action needed on your part. However, if you have employees outside of Wisconsin, you need to contact your client service representative (CSR) or email email@example.com with the 2020 SUTA rate for each state where you have employees. Please note that even if your rate hasn’t changed since last year, you still must pass it along to your CSR.
To ensure your SUTA obligations are calculated correctly within Orbit Payroll, report your non-Wisconsin SUTA rate(s) and filing frequency to Payroll Data as soon as possible. Doing so will guarantee your tax rate is calculated and deducted properly within Orbit Payroll, so you can rest easy knowing you’re paying the accurate SUTA amount.
Why do you need to verify your SUTA rate(s) every year?
SUTA is a percentage of an employee’s wages, and the rates vary based on different factors. Each state sets a minimum and maximum SUTA rate, and what your company actually owes will be determined by several factors including industry, how many former employees received unemployment benefits, and experience. These rates change over time, as employers get more experience and industry turnover rates change. Therefore, you’ll need to check your SUTA requirements every year — and let Payroll Data know your non-Wisconsin rate(s) and frequency changes.
Spread the word.
If you’re not responsible for monitoring your SUTA rates, please pass this information along to the appropriate person within your organization. If your company has employees outside of Wisconsin, following these practices will ensure Payroll Data can update the system with your SUTA information and help you remain compliant in 2020 and beyond!