Your 2022 Employer Payroll Taxes Are (Probably) About to Increase Due to Rising SUI Tax Rates
Many employers should expect to pay higher taxes for state unemployment insurance in 2022. Due to the pandemic driving high rates of unemployment, state funds have been depleted—and replenishing these funds will (partly) come out of higher employer payroll taxes. Here’s what you need to know.
A refresher on state unemployment insurance
Need a reminder on how state unemployment insurance taxes work? We’ve got you covered.
First, let’s talk terminology: state unemployment insurance (SUI) is known by many names; here are a few:
- SUI – State Unemployment Insurance
- SUTA – State Unemployment Tax Act
- Reemployment tax
- Unemployment benefit tax
Now, let’s get into what SUI actually is: SUI is a fund that pays out unemployment benefits (wage replacements) to an employee who has lost their job through no fault of their own and who is seeking new employment. Employers pay taxes into this fund.
In most (but not all) states, SUI is an employer-only tax, so employers do not withhold any amount for this tax from employee wages. There are three exceptions to this—the three states that do require employees to pay SUI taxes are: Alaska, New Jersey, and Pennsylvania.
What does SUI have to do with employer payroll taxes?
SUI is part of employer payroll taxes, which are made up of five different taxes:
- State unemployment insurance taxes (SUI, aka: SUTA)
- Federal unemployment insurance taxes (FUTA)
- Medicare taxes
- Social Security
- Local taxes
How SUI is changing in 2022
COVID-19 caused high rates of unemployment across the country and depleted many state unemployment insurance funds. Now, these funds need to be replenished so a number of states are increasing taxes. These increases can come in the form of:
a) higher wage base limits,
b) higher percentages (again, known as the tax rates) that are paid on the wage base limits, and/or
c) a combination of both.
How do I calculate my SUI?
Your SUI tax amount is based on a few factors:
- A wage base limit set by each state; this is a cap on the dollar amount per employee that is subject to SUI taxes
- A percentage (known as the tax rate or contribution rate) of the wage base limit; this percentage amount varies depending on factors like: industry, how long you’ve been in business, your particular hiring and firing history, etc.; there is a range that details the minimum and maximum contribution rate for each state
In order to calculate your SUI you need to know the wage base limit in your state and your contribution rate (again, this percentage will vary depending on your specific circumstances). Once you know these, you can do the calculation.
For example, the wage base limit in California is $7,000. Let’s say that your tax rate (the percentage you pay on the wage base limit) is 5% and you have 3 employees.
Here is how to do your calculation:
5% of $7,000 = $350
$350 x 3 = $1050
You will pay $1050 in SUI.
How do I find out the wage base limit in my state and the tax rate for my business?
New employers: your state agency will send out a notice with your assigned SUI tax rate when you first register your company as an employer with the state unemployment insurance agency or state department of labor.
Other employers: every year, you will receive a new tax rate notice in the mail that includes your rate for the upcoming year. Depending on the state, these are often mailed out between November of the prior year through March of the effective year.
If you haven’t received your letter, contact your state agency (website and phone numbers are listed in the table below).
What are the state wage base limits for 2022 compared to previous years?
Here’s a table with the wage base limits that includes what we know so far. Keep in mind that wage base limits are just one factor in calculating SUI; you also need to know your specific contribution rate.
| State | 2022 Wage Base Limit | 2021 Wage Base Limit | 2020 Wage Base Limit | State Agency Website and Phone Number |
|---|---|---|---|---|
| Alabama | $8,000 | $8,000 | $8,000 | Alabama DOL (334)242-8025 |
| Alaska | $45,200 | $43,600 | $41,500 | Alaska DOL (907)269-4700 |
| Arizona | $7,000 | $7,000 | $7,000 | Arizona: How to Apply for UI (877)600-2722 |
| Arkansas | $10,000 | $10,000 | $7,000 | Arkansas DOL (501)682-2121 |
| California | $7,000 | $7,000 | $7,000 | California DOL 1(800)300-5616 |
| Colorado | $17,000 | $13,600 | $13,600 | Colorado DOL (303)318-8000 |
| Connecticut | $15,000 | $15,000 | $15,000 | Connecticut DOL (203)941-6868 |
| Delaware | $16,500 | $15,000 | $15,000 | Delaware DOL 1(800)794-3032 |
| D.C. | $9,000 | $9,000 | $9,000 | D.C. DOES (202)724-7000 |
| Florida | $7,000 | $7,000 | $7,000 | Florida DEO 1(833)352-7759 |
| Georgia | $9,500 | $9,500 | $9,500 | Georgia DOL 1(877)709-8185 |
| Hawaii | $51,600 | $47,400 | $48,100 | Hawaii DOL Oahu: (808)586-8970 Hilo: (808)974-4086 Kona: (808)322-4822 Maui: (808)984-8400 Kauai: (808)274-3043 |
| Idaho | $46,500 | $43,000 | $41,600 | Idaho DOL (208)332-8942 |
| Illinois | $12,960 | $12,960 | $12,740 | Illinois DES 1(800)244-5631 |
| Indiana | $9,500 | $9,500 | $9,500 | Indiana DOL 1(800)891-6499 |
| Iowa | $34,800 | $32,400 | $31,600 | Iowa Workforce Development 1(866)239-0843 |
| Kansas | $14,000 | $14,000 | $14,000 | Kansas DOL 1(800)292-6333 |
| Kentucky | $10,800 | $11,100 | $10,800 | Kentucky Career Center (502)875-0442 |
| Louisiana | $7,700 | $7,700 | $7,700 | Louisiana Workforce Commission 1(866)783-5567 |
| Maine | $12,000 | $12,000 | $12,000 | Maine DOL 1(800)593-7660 |
| Maryland | $8,500 | $8,500 | $8,500 | Maryland DOL Contact Info |
| Massachusetts | $15,000 | $15,000 | $15,000 | Mass DUA 1(877)636-6800 |
| Michigan | $9,500 | $9,500 | $9,000 | Michigan Department of Labor and Opportunity Contact Info |
| Minnesota | TBD | $36,000 | $35,000 | Minnesota Unemployment Insurance 1-877-898-9090 |
| Mississippi | $14,000 | $14,000 | $14,000 | Mississippi DES 601-321-6000 |
| Missouri | $11,000 | $11,000 | $11,500 | Missouri DOL Contact Info |
| Montana | $38,100 | $35,300 | $34,100 | Montana Unemployment Insurance Division 406-444-2545 |
| Nebraska | $9,000 | $9,000 | $9,000 | NE Works 855-995-8863 |
| Nevada | $36,600 | $33,400 | $32,500 | Nevada DOL Contact Info |
| New Hampshire | $14,000 | $14,000 | $14,000 | New Hampshire Workforce Connect 1(800)852-3400 |
| New Jersey | $39,800 | $36,200 | $35,300 | New Jersey DOL Contact Info |
| New Mexico | $28,700 | $27,000 | $25,800 | New Mexico Workforce Connection Contact Info |
| New York | $12,000 | $11,800 | $11,600 | New York DOL 1(888)581-5812 |
| North Carolina | TBD | $26,000 | $25,200 | North Carolina DES 1(888)737-0259 |
| North Dakota | $38,500 | $38,500 | $37,900 | North Dakota DOL (701) 328-4995 |
| Ohio | $9,000 | $9,000 | $9,000 | Ohio Department of Job and Family Services 1(877)644-6562 |
| Oklahoma | $24,800 | $24,000 | $18,700 | Oklahoma ESC 1(800)555-1554 |
| Oregon | $47,700 | $43,800 | $42,100 | Oregon Employment Department 1(877)345-3484 |
| Pennsylvania | $10,000 | $10,000 | $10,000 | Pennsylvania Office of Unemployment Compensation Contact Info |
| Rhode Island | TBD | $26,100 | $25,500 | Rhode Island DLT (401)415-6772 |
| South Carolina | $14,000 | $14,000 | $14,000 | South Carolina Department of Employment and Workforce 1(866)831-1724 |
| South Dakota | $15,000 | $15,000 | $15,000 | South Dakota Department of Labor & Regulation (605)626-2452 |
| Tennessee | $7,000 | $7,000 | $7,000 | Tennesse Department of Labor & Workforce Development 1(877)813-0950 |
| Texas | $9,000 | $9,000 | $9,000 | Texas Workforce Commission 1(800)628-5115 |
| Utah | $41,600 | $38,900 | $36,600 | Utah Workforce Services (801)526-9675 |
| Vermont | $15,500 | $14,100 | $16,100 | Vermont DOL 1(877) 214-3332 |
| Virginia | $8,000 | $8,000 | $8,000 | Virginia Employment Commission Contact Info |
| Washington | $62,500 | $56,500 | $52,700 | Washington Employment Security Department 1(800)318-6022 |
| West Virginia | $12,000 | $12,000 | $12,000 | Workforce West Virginia 1(800)379-1032 |
| Wisconsin | $14,000 | $14,000 | Wisconsin Department of Workforce Development (608) 266-3131 | |
| Wyoming | TBD | $27,300 | WYUI (307)473-3789 |
What should I do to prepare for higher taxes?
First, make sure you know what your SUI rate is and that you start paying the correct amount when you run your first payroll in January. This is critical. If you pay the wrong amount, you will be subject to fines and penalties.
Next, work with your accountant to budget and forecast appropriately for 2022.
Are you a Gustomer?
Login to your account and update your payroll information before you run your first payroll in January.
Update your SUI rate in your company profile by following these steps:
1. Click the Taxes & compliance section and select Tax setup.
2. Click Manage Taxes under the applicable State Tax section.
3. Scroll to “State Tax Settings” and click edit next to SUI Rate.
4. Click Add a new rate.
5. Enter the number shown on the notice as a percentage rate. For example: if your notice says you have a rate of .055555, enter 5.5555%.
6. Set the “Effective Date” as the effective date listed on your notice.
In most (but not all) states the effective date will be January 1.
7. Click Save.
*If the update is being made after the deadline listed on the notice, agencies may assess penalties and/or interest for underpayments. These are the employer’s responsibility to pay.*
Correct your SUI rate or review rate history
If you realize that you previously entered an incorrect rate, update your SUI rate in your tax in Gusto as soon as you have your correct agency-assigned rate by following these steps.
1. Click the Taxes & compliance section and select Tax setup.
2. Click Manage Taxes under the applicable State Tax section.
3. Scroll to “State Tax Settings” and click edit next to SUI Rate.
4. Click Make a correction. Here you can correct the rates you’ve had in your account.
6. Enter the number shown on the notice as a percentage rate. For example: if your notice says you have a rate of .055555, enter 5.5555%.
7. Set the “Effective Date” as the effective date listed on your notice.
In most (but not all) states the effective date will be January 1.
8. Click Save.
*If the update is being made after the deadline listed on the notice, agencies may assess penalties and/or interest for underpayments. These are the employer’s responsibility to pay.*