State Unemployment Taxes (SUTA), sometimes called Reemployment Taxes, are taxes imposed on employers to fund the state’s unemployment insurance program.
The SUTA program is the state version of the Federal Unemployment Taxes (FUTA). State unemployment payments provide temporary financial assistance to eligible workers who have lost their jobs.
Who Pays the SUTA Amounts?
Employers are typically responsible for paying SUTA taxes. Employees do not pay these taxes, so the amount of SUTA imposed on their wages is NOT deducted from their paychecks.
In contrast, employees are liable for their employee share of the payroll taxes under the Federal Insurance Contributions Act (FICA). These taxes are deducted from an employee paycheck.
What are the Tax Rates and Wage Base?
The tax rates and wage base will vary significantly between states.
For example, Florida’s reemployment tax program charges SUTA on the first $7,000 of wages paid to an employee. A new employer’s initial tax rate is 2.7% of the first $7,000 of wages. After the employer has filed for 10 quarters using the initial 2.7% tax rate, their experience rating is adjusted upward or downward depending upon their filing history. Employers with more unemployment claims from prior employees will have a lower experience rating and pay higher tax rates. The maximum tax rate allowed under Florida law is 5.4% on the first $7,000 of wages.
How does SUTA Interact with FUTA?
Employers will generally file their SUTA returns and taxes first. After filing the state returns and paying their taxes on time and in full, the employer then completes their annual Form 940 (Employer Annual FUTA Return) to calculate and pay their FUTA tax. If the employer paid all of their SUTA on time, they are generally allowed a credit against their FUTA liability.