Will SUTA Tax Rates Increase Due to COVID-19 and Rising Unemployment?

The COVID-19 pandemic has caused a severe economic downturn and a sharp increase in unemployment claims: over 65 million people across the country have filed for unemployment since March of this year. 

Many employers are concerned about the impact of the claims spike on the tax rates of state unemployment insurance (SUI). We’ll walk you through everything you need to know. 

What is SUI?

Before we get into how SUI tax rates will be affected by the economy, let’s start with a little refresher: 

SUI are state-specific stipends provided to anyone who has lost employment (by no fault of their own) and is actively seeking new employment. The money is funded by taxes paid by the employer (keep in mind: in certain states, the employee also pays state unemployment insurance tax). When an organization terminates an employee and that person collects unemployment insurance, the company’s tax rate will typically increase (although that increase will not happen within the termination year; rather, increases are seen in later years). 

To learn more about SUI, read this comprehensive guide.  

What is SUTA tax? How is it different from SUI tax?

The following terms tend to be interchangeable:

• SUTA (or State Unemployment Tax Act)
• SUTA tax (or State Unemployment Tax Act tax)
• SUI tax (or State Unemployment Insurance tax) 
• Reemployment tax
• Unemployment benefit tax

Confusing, eh? Yep, these terms all refer to the tax we mentioned above that employers (and in certain states, employees) pay to fund SUI. This SUTA tax (also known as SUI tax! Or, reemployment tax! Or, employment benefit tax!) is included in payroll taxes. 

How has the COVID-19 pandemic affected SUI?

Let’s play pretend: Imagine the taxes you pay toward unemployment insurance are being saved in an account. Every quarter you continue to put money in that account. When an employee is terminated, that employee begins to make withdrawals from that account and so, the amount within the account diminishes. In order to build the account back up, you must start putting even more money into the account every quarter. 

That’s the logic behind increasing SUI tax rates depending on how many employees your company has terminated. 

Will SUTA tax rates increase in 2020?

Due to the unusual nature of the pandemic—and the havoc it has wreaked on businesses— certain states within the U.S. have decided that any company that has terminated employees due to circumstances related to the virus will not see a SUTA tax rate increase. 

So, your SUTA tax rate will depend on the state where your business is registered and operates.

SUTA tax rates for 2020 by state

Check out this state-by-state table to understand what you can expect: 

State	Will my company experience SUTA tax rate increases due to terminations related to COVID-19?	Anything else I need to know?
Alabama	No	If the terminations were due to COVID-19, your tax rate should not increase.  When you (the employer) file your partial claims, answer YES when asked if the claim is related to COVID-19.
Alaska	It’s complicated	Using an employer option form, employers may request that the Department of Labor and Workforce Development adjust fluctuations in payroll that are directly related to the spread of coronavirus.  Employers are required to provide former employees with information about unemployment benefits within seven days of the employee’s last day of work.
Arizona	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Arkansas	Yes	No guidance yet.
California	Yes	No guidance yet.
Colorado	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Connecticut	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Delaware	No	If the claims made are related to the virus, there will be no tax rate increase.
DC	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Florida	Yes	No guidance yet.
Georgia	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Hawaii	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Idaho	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Illinois	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Indiana	It’s complicated	Rather than increasing taxes for individual employers, a mutualized tax (a tax that is distributed across employers throughout the state) will be imposed. See more information here.
Iowa	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Kansas	Yes	No guidance yet.
Kentucky	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Louisiana	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Maine	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Maryland	Yes	No guidance yet.
Massachusetts	No	Employers will not see a rate increase due to unemployment claims that are related to the pandemic. This is in effect for unemployment benefits paid between March 10, 2020 through May 26, 2021 or 180 days after the end of the emergency declaration period—whichever is sooner.  See more information here.
Michigan	No	Michigan employers who are required to reduce operations or close under an executive order will not see unemployment tax rates increase.  See more information here.
Minnesota	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Mississippi	Yes	No guidance yet.
Missouri	It’s complicated	Any benefits paid out to claimants between March 8, 2020 through July 4, 2020 will not affect the employer’s SUI tax rate.  See more information here (click on the tab marked Employers – Shared Work, Mass Claim, Taxes).
Montana	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Nebraska	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Nevada	Yes	No guidance yet.
New Hampshire		New Hampshire has raised its unemployment tax rates for the second quarter of 2020. Tax rates for the second quarter range from 0.1% to 1.7% for positive-rated employers and from 3.3% to 7.5% for negative-rated employers. The tax rate for new employers is 1.7%. See more information here.
New Jersey	Yes	No guidance yet.
New Mexico	Yes	No guidance yet.
New York	Yes	No guidance yet.
North Carolina	No	Employers must respond to information requests and indicate that the employee was terminated due to circumstances related to the virus.  See more information here.
North Dakota	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Ohio	It’s complicated	Rather than increasing taxes for individual employers, a mutualized tax will be imposed. Also any employers who was affected by COVID-19 and received a penalty or interest for filing a late unemployment tax due can request those fees be waived.  See more information here.
Oklahoma	No	If the claims made are related to the virus, there will be no tax rate increase. Employers who do see an increase should protest it and submit specific information about the claim.  See more information here.
Oregon	It’s complicated	Employers affected by COVID-19 may request relief from interest and penalties for late unemployment tax payments.  Employers that were unable to send unemployment taxes for the first quarter of 2020 must submit a new form to receive the waiver.
Pennsylvania	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Rhode Island	No	If the claims made are related to the virus and were submitted after January 27, 2020, there will be no tax rate increase.  See more information here.
South Carolina	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
South Dakota	No	If the claims made are related to the virus, there will be no tax rate increase.  See more information here.
Tennessee	Yes	No guidance yet.
Texas	It’s complicated	If an employee was on unpaid leave and made UI claims, and evidence reveals that this was due to medical reasons, the employer may be protected from a rate increase. However, if the leave was due to lowering exposure risk that may not have been necessary, then the employer may see a rate increase.  See more information here.
Utah	Probably not	Unemployment claims made by former employees will be charged to the state’s “social costs” rather than to the employer’s account. While employers are charged social costs, the burden will be diminished.  See more information here.
Vermont	No	See more information here.
Virginia	No	See more information here.
Washington	It’s complicated	While the tax rate will likely increase, employers may apply to have these charges “offset” for the first two quarters of 2020. The offset could reduce the company’s 2021 tax rate. *Applications closed on September.* For more information, go here.
West Virginia	Yes	No guidance yet.
Wisconsin	Probably not	If an employee is terminated for circumstances related to the virus, an employer may submit a form (Form UCB-18823-E) to the Department of Workforce Development within 30 days after the initial claim is filed. The form will request “relief of UI benefit charging.”  For more information and to find the form, go here.
Wyoming	Yes	No guidance yet.