Leadership in a high-growth technology company offers many opportunities to learn, grow, and change the status quo. It also provides key insights into budget and business trends that executives need to prioritize. Regulatory compliance is an ongoing challenge for organizations; it is also a problem that does not go away.

This year, a pivotal act in the spotlight is the State Unemployment Tax Act, or SUTA. As unemployment rates rose in 2020, public unemployment insurance funds did the opposite. Now, part of the replenishment of those funds will come from higher employer payroll taxes in many states. In a 2020 article that predicted a spike in jobless claims for businesses, Tax Foundation researcher Jared Walczak noted, “No state may be fully prepared for jobless claims on this scale, but some states are much better prepared than others.”

The year 2020 has passed, but business leaders now face a new tax playing field made more difficult by the ongoing complexities of compliance and state-specific tax regulations. Today’s financial leaders need to be aware of potential pitfalls and streamline their compliance process, especially in tax matters.

I strongly believe in using technology to support your internal processes. Understanding what SUTA is, how it is calculated, the updated tax rate for your state, and how to optimize your tax process internally is complicated. But it will help you steer your organization through the coming tax seasons.

What is SUTA?

SUTA is a payroll tax required by employers. This is also known as state unemployment insurance, or SU. Taxes paid are placed in a state’s unemployment fund to be used by employees who have separated from their employers. Neglecting to pay SUTA or SUI taxes can result in fines, penalties or, in serious cases, criminal charges for the employer.

While the federal unemployment tax, or FUTAis paid only by the employer, some states require that additional amounts be withheld from an employee’s pay for state unemployment taxes.

How is the SUTA calculated?

Leaders should be aware that several factors are considered when calculating SUTA rates. These can include the age of your company, the turnover rate in your industry, and the number of former employees who have filed unemployment claims. SUTA taxes are paid to the state where the work takes place. Salary base and tax limits vary by state. Your SUTA rate may change each year based on state assessments. Each applicable state will send your company a notice describing how it determines rates.

How do I determine the correct SUTA status of an employee?

For employees who work in a single state, you will pay SUTA taxes to the state where the employee’s services are located. But if your company has employees who work in multiple states, it gets more complicated. Determining the appropriate SUTA state for a multi-state employee may depend on where the employee’s “base of operations” is located – the state where the employee receives direction or control or possibly the state of residence of an employee. After determining the correct state for each employee, you will submit SUTA tax payments to each employee’s applicable state.

Where can I find the updated SUTA 2022 rate for my state?

As mentioned earlier, tax rates may vary. For example, construction companies may pay a higher SUTA tax rate. In addition, each state sets up its unemployment tax account and registers new employers differently. However, things like proof of worker’s compensation insurance and an employer identification number are required for every employer. Without the right partners or the right systems in place, the process can feel daunting for leaders.

Business owners can find the most recent SUTA rate on their state website. There they can access the full and current SUTA tax rate informationeven when updates occur.

A bit about FUTA credit discounts

Another important tax topic for business owners today is FUTA credit reductions. As you may know, several states have taken out loans from the federal government during the pandemic to help pay unemployment claims and reserve shortfalls. Some of these states were “credit-restricted states” or a state that “took loans from the federal government to meet its unemployment benefit obligations and failed to repay the loans on time. allotted”.

The result? Potential credit-cut states now risk raising FUTA taxes if they cannot repay loans by the US Department of Labor’s Nov. 10, 2022, deadline. States at risk in 2022 include California, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, New Jersey, New York and Pennsylvania, as well as the US Virgin Islands.

Simplify taxes with technology

Being a leader, especially in today’s changing business climate, can be challenging. Federal and state tax regulations are complex and, if not handled properly, can lead to heavy fines and undue stress on your tax, HR, and management teams. A tool that simplifies the tax management process can streamline filings and ensure businesses stay compliant for their specific state and industry. But not all technologies are created equal. If it’s not intuitive and compliance-focused, it can be more trouble than it’s worth.

In a survey of 800 US senior executives, conducted by Pollfish on behalf of Paycom in December 2021, 88% of respondents said they believed their organization had purchased technology that was not fully utilized by their employees. .

A tax process that takes into account the digital and regulatory landscape should make the employee is the resource person to interact with and inform their data, from benefits and taxes to time tracking and payroll. Anything analogous or outside the competence of employees is at best inefficient and at worst detrimental to your business bottom line.

When today’s leaders have a clear understanding of requirements like SUTA and deploy the right technology to help manage their tax processes, they prioritize their internal processes and prepare their business for success long after the tax season. taxes.

This article does not necessarily reflect the views of the Bureau of National Affairs, Inc., publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Craig Boelte is Chief Financial Officer of Paycom.

We would love to hear your smart and original point of view: write for us