Payroll

State Income Tax (SIT) is a required tax applied to an employee’s wages. Small business owners are responsible for deducting SIT from an employee’s gross wages and submitting this tax to the state’s tax agency.

• Select States – All states require State Income Tax withholdings except for Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

• SIT Calculation – State Income Tax is withheld from each paycheck and it is calculated using the employee’s pay, the employee’s marital status, the employee’s state withholding allowance amount, and if applicable, any additional withholding amounts dictated by the employee. The actual SIT rates will differ for each state.

• How It Works – When a new employee is hired, they must complete a W-4 form for the state. This form will document the key data points for employers to begin withholding the appropriate State Income Tax from their paycheck. Once a small business registers for State Income Tax and you have a completed W-4 form, you can begin running payroll and withholding State Income Tax for an employee.

If you are planning to hire or have already hired employees, you are required to pay State Unemployment Insurance taxes (SUI) on their wages.

The SUI program offers short-term unemployment benefits to eligible workers who are unemployed because they have lost or left their jobs. Some of the reasons for leaving the job include being laid off, being fired for reasons other than misconduct, or leaving due to health or personal problems.

SUI eligibility and benefits are determined by the individual state’s laws. Employer taxes associated with SUI rates vary by state. They can also be scaled based on the number of unemployment claims associated with a business. Stated in other words, the more claims you file, the higher your tax rate becomes.

Once a small business registers for State Unemployment Insurance a tax is applied to employee paychecks. This means employers must register for the SUI tax early and before paying their first employee’s payroll.

CorpNet can help your business register for your State Unemployment Insurance account, which will save you time in researching state requirements, filing paperwork, and dealing with your state’s unemployment administration.