Arizona Hourly Paycheck Calculator
If you’re an employer in Arizona and you’re feeling unsure about processing payroll, you’ve come to the right place. Below, we’ve compiled the key Arizona state and federal payroll taxes, along with important paycheck rules, that you need to know.
Arizona state payroll taxes
Arizona withholding tax
Arizona’s withholding calculations are unique when compared to other states. Arizona withholds a flat percentage of a worker’s gross wages. Many other states use formulas based on tax filing status, the number of exemptions, and tax withholding tables.
Workers should complete Form A-4 within five days of starting work. And if they don’t, it means you’ll need to withhold tax at 2.7%.
Some employees may be exempt from withholding if they expect to have no state tax liability for the year. In this case, the employee checks the box for a zero percent withholding on Form A-4. They will need to renew their election each year by completing a new Form A-4. Certain classifications of workers, like Native Americans, military spouses, and nonresidents, are automatically exempt from withholding. They need to complete Form WEC, Withholding Exemption Certificate.
Paying Arizona withholding tax
You’ll need to register your business with the Arizona Department of Revenue to pay the state’s withholding tax.
How often you pay depends on how much tax you withhold in a year. Payment frequencies may be annual, quarterly, monthly, semi-weekly, or next day. Electronic payments are required if you owe $500 or more a year, and penalties can be charged if you’re required to pay electronically but fail to do so.
Employers that pay annually file Form A1-APR, Arizona Annual Payment Withholding Tax Return. This form is due by January 31 for the previous year. You’ll also need to send along copies of your federal Form W-2 and 1099s if any Arizona income tax was withheld.
All other employers need to file Form A1-QTR, Arizona Withholding Reconciliation Return, each calendar quarter to reconcile the amount of tax due with the amount of tax already paid. These quarterly reports must be filed even when you withheld no tax.
You’ll also need to send an annual reconciliation report on Form A1-R, Arizona Withholding Reconciliation Return. You need to send along copies of your federal Form W-2 and 1099 if any Arizona income tax was withheld.
Arizona unemployment tax
Arizona unemployment tax is paid on the first $7,000 of each worker’s wages each year. Almost all employers pay this tax to provide financial help to workers who are out of work through no fault of their own.
New employers are assigned a 2% tax rate for at least the first two calendar years. After that, your rate is adjusted depending on the amount of taxes you paid, the amount of benefits paid to your former workers, and your annual payroll average.
Each quarter you’ll need to file reports using Form UC-108, Unemployment Tax and Wage Report, and pay the taxes due. It’s important to note that you need to file the report even for quarters when no wages were paid.
Other Arizona paycheck rules
You’ll also need to keep these Arizona payroll rules in mind when processing your payroll.
- Minimum wage: As of January 1, 2022, the minimum wage in Arizona is $12.80 per hour. Annual adjustments are made based on increases to the cost of living.
- Earned paid sick leave: Employees are entitled to paid sick leave based on the number of hours they work. Employers with fewer than 15 workers must provide at least one hour of paid sick leave for every 30 hours worked, up to a maximum of 24 hours a year. Employers with at least 15 employees must provide the same, but the maximum number of hours an employee can earn or use is 40 hours a year.
- Workers’ Compensation insurance: Requirements to obtain Workers’ Compensation vary by state, this table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information.
- Reporting new hires: Employers have 20 days to register newly hired or rehired employees with the Arizona New Hire Reporting Center.
- Final paychecks: When employees resign, their last paycheck is due by the next regular payday. For employees whose employment is terminated, final wages are due within seven working days or the next regular payday, whichever is sooner.
- Overtime pay: Arizona doesn’t have any state laws governing overtime pay, so the federal rules under the Fair Labor Standards Act apply. Hourly employees are generally to be paid at least time and a half for all hours worked over 40 in a week.
- Voting leave: Arizona employers may need to provide up to three hours of paid leave to allow a worker to vote in a primary or general election.
Federal payroll taxes
Employers also need to collect and pay certain federal payroll taxes. There are four you need to know about. They are:
|Federal Payroll Taxes|
Federal unemployment tax (FUTA)
Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but many employers only have to pay 0.6% each year.
Federal income tax (FIT)
Employees need to pay their federal income tax bill throughout the year via payroll deductions. Calculating the federal tax is a bit more complicated than Arizona’s percentage method. The amount of tax you’ll take out of your workers’ pay is based primarily on information from Form W-4, Employee’s Withholding Certificate. Workers should fill this out when they start working for you. With the Form W-4 information, you’ll use the federal tax tables or payroll software to make the withholding calculation.
Additional Medicare tax
You must withhold the Additional Medicare tax from workers earning more than $200,000 per year. The 2022 tax rate is 0.9% on the excess wages.
Federal Insurance Contributions Act (FICA)
The Federal Insurance Contributions Act, or FICA tax, is made up of the Medicare tax and the Social Security tax. In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. The Medicare tax requires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.
|Social Security tax||6.2% on the first $147,000 of wages in 2022|
|Medicare tax||1.45% on all wages|
Paying federal payroll taxes
Paying FICA, Additional Medicare tax, and FIT
Employers need to pay FICA, Additional Medicare tax, and FIT monthly, semi-weekly, or by the next business day, depending on the amount of tax due. Regardless of how often you pay, you’ll need to file quarterly payroll tax returns on Form 941, Employer’s Quarterly Federal Tax Return.
FUTA is most commonly paid annually, but some large employers may need to pay quarterly. You’ll submit Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, each time you make payment.
Those are the basics of payroll taxes in Arizona. If you prefer to leave payroll to the pros, no problem. Give Gusto a try.