Federal payroll tax rates like income tax, Social Security (6.2% each for both employer and employee), and Medicare (1.45% each) are set by the IRS. However, each state specifies its own rates for income, unemployment, and other taxes. Below is a state-by-state map showing tax rates, including supplemental taxes and workers’ compensation.
All of QuickBooks Payroll products are full service, meaning it handles all calculations and tax payments to federal and state agencies. The software is always updated with the most current tax information, and you will never be penalized for mistakes QuickBooks representatives make. And if you opt for QuickBooks Payroll Elite, errors you make are covered as well. QuickBooks offers a free 30-day trial.
How Payroll Taxes Work
In addition to income taxes, Social Security and Medicare—collectively known as Federal Insurance Contribution Act (FICA), are taxes that employers and self-employed workers pay to the IRS to comply with payroll laws. The IRS and state tax agencies also require monies to be paid for unemployment insurance, referred to as the Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA), respectively, when doing payroll. Combined, these are called employer payroll taxes.
2020 Payroll Tax Rates by State Map
Hover over the state below to find the payroll tax rates for your state. You can then choose to click that state for more information. You can also lookup state-by-state details with links to more data using the table below.
2020 Payroll Tax Rates by State Search
Select your state from the drop-down box below for specific state-by-state payroll tax rate information. You’ll find whether your state has an income tax as well as if they have any local taxes. You’ll also find a government link to learn more about your state’s employment taxes.
Federal Payroll Tax Rates
At the federal level, in addition to income tax, there are two categories of employment taxes: FUTA and FICA. We’ll cover each briefly as you’ll process these as tax deductions on employees’ paychecks. You must also pay these taxes on your employees’ behalf, regardless of the state in which you operate. Payroll services like QuickBooks Payroll make it easy because it calculates taxes due automatically, pays them, and guarantees you won’t pay any penalties. It’s also easy to set up and process payroll with QuickBooks.
- Income tax: The tax rate is based on withholdings chosen on the employee’s W-4 form.
- FUTA: This 6% federal tax is to cover unemployment; in most cases, you’ll be credited back 5.4% of this amount for paying your state taxes on time, resulting in a net tax of .6%.
- FICA: This 15.3% federal tax is made up of two parts: 12.4% to cover Social Security and 2.9%to cover Medicare. For employees earning more than $200,000, the Medicare tax rate goes up by an additional .9%. Therefore, FICA can range between 15.3% and 16.2%.
State Payroll Tax Rates
Some states have an income tax while others don’t. However, all states have state unemployment taxes. The percentage of SUTA varies by state. Each state determines the wage base or minimum earnings required for SUTA to be deducted. Of course, they may not call it SUTA. They may refer to it as unemployment insurance (UI), for example.
In addition, the SUTA rates are affected by an employer’s specific unemployment history and industry. In addition, some states assign a generic new employer rate that may be higher or lower than what the employer will pay once they have been in business for a period of time, and each state determines the time frame. For example, if one employer has higher unemployment claims than another, that employer will pay a higher unemployment rate.
Here are two examples:
California Payroll Tax Rate Example
New employers pay 3.4% in SUTA for employees making more than $7,000 per year. They’ve renamed SUTA as State Unemployment Insurance (SUI). Existing employers pay between 1.5% and 6.2% depending on their unemployment experience. Those who layoff or terminate fewer employees will typically have a lower rate. These taxes are calculated on top of the FICA and FUTA taxes that employers in California and all states must pay.
New York Payroll Tax Rate Example
New Employers pay 3.2% in SUTA for employees making more than $11,100 per year. They refer to it as a UI contribution rate. Existing employers pay between .06% and 7.9%. Employers with few unemployment claims may pay nearly 10 times less than those with high unemployment claims. In New York, as in most states, it pays to reduce your turnover.
Other State Payroll Tax Rates
Some states like Nevada and New Hampshire have no other employment taxes. However, they’re the exception. Most states have state income taxes, supplemental taxes, or taxes like workers’ compensation, disability, or local taxes.
State Income Taxes
Most states have an income tax and tax a portion of an employee’s income based on withholding tables. Each state sets its own withholding tax rates, such as Arizona, which withholds between .08% and 5.1%, depending on the number of deductions an employee is eligible for.
In states with large urban areas, you’ll often find local taxes added to your employment tax requirements. For example, San Francisco; Denver; and Newark, New Jersey, require employees to pay local income taxes. Other states like Kentucky, Ohio, and Pennsylvania collect local income taxes in many cities.
Some states tax supplemental wages like bonuses, commissions, overtime, and severance pay as examples. Less than half of states in the United States have no supplemental tax while the rest range from 1.84% to 11%—with the exception of Vermont that charges 30%. For instance, in California, employees are taxed 6.6% for most supplemental pay but are taxed at 10.23% if the supplemental pay is received from a bonus or stock option.
These rates can change from year to year. With QuickBooks Payroll, you don’t have to spend time researching the current rate. It can withhold money for both federal and state supplemental taxes if you choose that option.
Workers’ compensation is purchased as private insurance by business owners in most states. However, states like New Mexico, Oregon, and Washington require it to be paid as a tax. As an example, Oregon employees pay 1.1 cents per hour while their employers match that rate for a total of 2.2 cents an hour paid to Oregon to cover state-managed workers’ compensation.
Some states like California, Hawaii, and New York ensure that workers in their state have disability insurance coverage. Therefore, additional insurance is included as a tax in those states. It ranges from 0.26% in New Jersey to 1.30% in Rhode Island. Disability insurance differs from workers’ compensation, which covers on-the-job injuries only, by covering all injuries and health issues that affect a worker’s ability to work.
Some states have begun to mandate employer-provided sick leave or paid sick time off. New York, for example, deducts 0.27% of the employee’s wages each pay period to cover paid leave for employees in that state.
Employer Responsibilities for Payroll Taxes
Employers managing payroll taxes in one state may find it easy to keep up with the various state tax requirements when they have one or two employees. However, once you hire more than 10 employees and/or expand into multiple states, you can become overwhelmed quickly. It’s often best to work with a payroll provider like QuickBooks Payroll to prevent tax errors that could end up costing you thousands of dollars in penalties if not worse (jail time).
QuickBooks Payroll will calculate deductions and pay tax agencies on your behalf. All of its payroll products are full service, which means you don’t have to do much aside from setting up your employees within the system and, even then, representatives will assist you if you select a premium offering. The software has state-by-state tax rate data baked into its payroll database, so you don’t have to keep up with the tax rate changes from year to year―and it’s updated often. Try the service free for 30 days.
Payroll Tax Rate Complexities
Each state does its own thing in terms of whether to have a state income tax, when tax payments are due, what rates they use, and what forms to file. We’ll cover some of the differences below to make you aware of what may vary in each state.
States That Have a State Income Tax
Not all states have a state income tax. However, in states that do, the employee must be asked what amount to withhold from the paycheck. That amount is to be withheld by the employer and paid to the state. The income tax rate varies by state and also varies by person based on factors like their marital status and number of exemptions they claim.
Employees provide this information on the equivalent of a federal W-4 form, which may be called by a different name in each state. For example, South Dakota has no state income taxes, North Dakota does and uses the Federal W-4 to track withholdings. New Jersey also has state tax withholdings and tracks them on an NJ-W4 form.
Quarterly Tax Payment Due Dates
Quarterly FUTA taxes are due if you owe more than $500 in taxes each quarter. The due dates are:
- Quarter one: April 30
- Quarter two: July 31
- Quarter three: October 31
- Quarter four: January 31
However, SUTA tax due dates varies by state. For example, in Michigan, the taxes are due on the 25th of the month instead of the end of the month: April 25, July 25, October 25, and January 25. Failing to meet the deadline may result in a penalty or late tax payment interest assessment. Therefore, you not only have to know what taxes to withhold and pay but also when and how to pay it—by state.
Credit Reduction States
In the past, states took loans from the federal government when they could not meet their unemployment liabilities. Instead of getting a 5.4% credit reduction, some employers, based on the state they were in, saw their credit deduction reduced by as much as, and sometimes more than, 2.1%. As of 2020, however, the only credit reduction state isn’t a state, but a territory—the Virgin Islands. Its credit reduction has been reduced by 2.7%
The IRS explains it like this: generally, employers may receive a credit of 5.4% when they file their Form 940 (PDF), employer’s FUTA return, to result in a net FUTA tax rate of 0.6% (6.0% – 5.4% = 0.6%).
What that means is that you’re likely to pay higher taxes when hiring employees in the Virgin Islands as the credit reduction goes up by .03% a year, driving your tax up by that amount annually.
Form names vary across states as well. While Form 940 is used to pay FUTA and Form 941 for FICA, each state has its own form names. For example, in Arizona, SUTA is paid using a UC-018 form and, in Illinois, the form name is EA-50. For more information, refer to your state tax website.
Avoiding Payroll Taxes
Business owners who don’t want to deal with payroll taxes can opt to work with independent contractors. Freelancers and gig workers are independent self-employed contractors who work for you based on a project or deliverable. They’re not employees and, as such, they pay their own taxes. Be sure you document your work agreement in a contract to make sure you’re both on the same page regarding work expectations.
You’ll need to familiarize yourself with the requirements as to when you can pay a worker as a contractor vs an employee. Also, consider using a payroll service like QuickBooks Payroll to pay the contractor. You’ll need to issue a 1099 tax form at the end of the year, and its service will handle this for you at no extra cost.
Frequently Asked Questions (FAQs) About Payroll Tax Rates
We understand that you may still have questions about payroll tax rates after reading this article. To help, we’ve compiled a few of the most commonly asked questions small business owners have about payroll taxes. If you have additional questions, suggestions, or concerns, feel free to leave a comment at the bottom of this article.
What are the penalties for making a mistake in employee tax payments?
The IRS can levy tax penalties as high as 5% a month for unpaid taxes. Penalties are charged if you fail to file by the deadline, file the wrong amount, fail to pay at all, or pay with a bad check. However, as long as you attempt to comply with the law, you may find that some relief from tax penalties is available.
If I outsource payroll and taxes, am I still liable for a tax mistake?
The business entity is required to pay employment taxes. If you outsource your payroll to a third party, you will retain liability for any tax mistakes. It’s a good idea to choose a vetted professional or payroll service to ensure payroll tax compliance.
Where can I find tax withholding tables?
The IRS posted 2020 tax withholding tables in December of 2019. In addition, the IRS provides a tax withholding calculator to help determine how much tax will be withheld from an employee’s paycheck. Each state also publishes tax withholding tables, which you can find on the state tax website we provided in the table above.
Paying your payroll taxes correctly and on time is an important part of being successful as an employer, but it can become challenging as you grow. Tax rates change from year to year, especially state payroll tax rates, and you must keep track of them to calculate your business and your employees’ tax obligations accurately.
Using a payroll provider like QuickBooks Payroll will help ensure you are always up-to-date on federal and state payroll tax rates. You won’t technically even have to remember the tax rates because the service handles withholding and paying the taxes for you. There are a variety of payroll products from which to choose, and one product guarantees you won’t receive any tax penalties even if you make a mistake. Start processing payroll free for 30 days.