After multiple delays, Texas officially released its new, increased SUTA rates, creating additional tax payments for many companies.
While SUTA rate notices typically occur at the end of each year, many were delayed due to COVID-19. With unprecedented unemployment claims, state unemployment funds were depleted quickly. This rise in unemployment also affected the state SUTA rates that have been or will be issued.
Businesses need to pay attention to SUTA and unemployment claims. As tax rates increase, employers will be on the line for higher payments while also staying compliant. Partnering with a PEO can help you stay focused on your mission while keeping track of tax obligations such as SUTA.
What is SUTA?
SUTA stands for State Unemployment Tax Act. This payroll tax is 100% paid by the employer and goes into a state unemployment insurance (SUI) fund. Each state establishes its own tax rate and wage base. The fund pays unemployment benefits to employees who have become unemployed at no fault of their own.
Calculating SUTA
To find the SUTA amount owed, multiply your company’s tax rate by the taxable wage base of all your employees.
Here’s how an employer in Texas would calculate SUTA:
$9,000 taxable wage base x 2.7% tax rate x number of employees = Texas SUTA cost for the year. The yearly cost is divided by four and paid by quarter.
Tax rates are unique to each company, while the wage base is the same for all employers in one state. The number of unemployment claim losses for a company impacts their tax rate. New businesses or businesses that don’t lose many claims have a lower tax rate. Companies that have lost many unemployment claims have a higher tax rate.
Texas SUTA rate increase
On July 2, The Texas Workforce Commission (TWC) issued one of these most recent SUI tax rate notices. The rate was initially delayed until February of 2021 and then delayed again to keep rates as low as possible for Texas employers. Read the TWC notice here.
Managing SUTA and unemployment with a PEO
Partnering with a PEO means your employees are reported under the PEO’s SUTA account and, in turn, minimizes the impact on your company’s SUTA rate when unemployment claims occur.
Sharp increases in company costs can be avoided when unemployment claims are managed appropriately. PEOs are responsible for reporting, collecting, and depositing employment taxes with state and federal authorities to keep their clients compliant. At Nextep, our HR experts help you manage unemployment claims by guiding you through the entire lifecycle of an employee, from recruitment to termination.
Questions? Nextep experts are here to help! Contact us online or at 888-811-5150.
