What is State Unemployment Insurance Tax (SUI)?

Irmak Kocyildiz

Irmak Kocyildiz

7 min read

2021-04-09

What is State Unemployment Insurance Tax (SUI)?

What is State Unemployment Insurance Tax(SUI)?

State Unemployment Insurance is an important term for employers and it is important that they know what it is. You may have heard of state unemployment insurance under different names –  the state unemployment tax act (SUTA) or State Unemployment Insurance Tax. Employers pay state and federal unemployment tax. So let’s talk about what state unemployment insurance tax is.

What is SUI?

State Unemployment Insurance, or SUI tax, is a program that provides tax-funded short-term benefits to workers who lose their jobs for various reasons due to no fault of their own. It is a payroll tax that employers must pay on behalf of their own employees. The amount employers have to pay varies by state and certain other factors.

In other words, SUI is the unemployment insurance assistance program paid to unemployed workers looking for a job. It is a program that provides assistance to the unemployed during this period. It supports people in their job search process. However, this assistance is not applied in case of losing every job. We will talk about this in more detail in the headings below.

Who Should Pay the State Unemployment Insurance Tax?

Employers are required to pay state unemployment insurance taxes on behalf of their employees. States may require employers to pay this tax. However, in some states such as Alaska, New Jersey, and Pennsylvania, employees must also contribute towards state unemployment insurance tax, meaning both employees and employers pay this tax. This program provides financial assistance to unemployed workers.

Who Receives the State Unemployment Insurance Tax?

Workers who lose their jobs for any reason are entitled to this tax. Employees who are dismissed without their own will and without their own mistakes may be entitled to this assistance during this process. However, this program does not apply to those who lose their jobs due to misconduct. Persons who lose their jobs by abuse of office cannot be entitled to these benefits. If you are in search of a new job, you can receive these benefits until you find a job or until the deadline set by the state.

State Unemployment Insurance Tax Rates

It is an aid that is paid to workers who have lost their jobs to any cause aside from misconduct. However, the rates of this tax paid by the employer vary. State Unemployment Insurance Tax rates may vary depending on the state. Each state sets its own State Unemployment Insurance Tax rates and tax bases. In addition, these SUTA rates may vary depending on certain factors. These rates may vary depending on the current sector of the enterprise and how many people who leave the enterprise apply for unemployment benefits after they leave. As an employer, the tax rate you have to pay varies by state, the state creates a tax rate for you around these factors.

Keeping State Unemployment Insurance Tax Rates Low

There are a number of possibilities for you to keep the State Unemployment Insurance Tax Rates low.

  • Reducing layoffs in your business contributes to the reduction of these tax rates.
  • Try to avoid high employee turnover.

Due to the fact that this tax rate changes according to the number of people applying for unemployment benefits after leaving their jobs, if you reduce layoffs, the number of workers claiming unemployment benefits will decrease. In addition, the fewer employees you have, the lower your tax rate will be.

SUTA Account for a New Employer

The state will most likely give you a standard State Unemployment Insurance tax rate when you start out as a new employer. This rate may change over time depending on your experience time. As a new employer, you must register with the State’s SUTA account to pay State Unemployment tax. You have to register as an employer. After opening this tax account, the state gives you an unemployment tax rate. This employer registration process varies by state. You can get detailed information about the employer registration process from the state’s official websites. Most states allow online applications from their official websites. With this employer registration, you can get an account number and tax rate and use it to make your payments. However, this ratio may change depending on certain factors later on, as we mentioned above. You can also see this term under different names in the states. SUTA may have different names such as unemployment insurance or unemployment tax.

FUTA and SUTA Tax

State unemployment tax act (SUTA) tax and FUTA are both unemployment benefit programs that help those who lose their job. Federal and State unemployment taxes are paid by most employers. The Federal Unemployment Tax Act (FUTA) is a program that, like SUTA, helps pay unemployment benefits to workers who lose their jobs. Employers pay the FUTA tax, FUTA tax rates are generally fixed at 6.0% and do not vary like SUTA rates. To report the annual Federal Unemployment Tax Act (FUTA) tax, the IRS Form 940 must be completed. As the official name suggests, IRS Form 940 is the Employer’s annual federal unemployment tax (FUTA) return. For this form, you must have your Employer Identification Number, if you do not have an employer identification number (EIN), you can apply for an EIN by filling out the IRS SS-4 Form. For more information, you can check out our Tax Identification Number blog post, which can be a guide for your employer identification number.

Bottom Line

State Unemployment Tax is a payroll tax that employers pay for their employees. It is a program that provides financial support to employees who have lost their jobs due to no fault of their own. As we mentioned above, some states have to pay their employees as well as employers. Tax rates vary by state. For the State Unemployment Tax, you must register with an employer. The state then gives you a rate, and this rate may increase over time according to the cases listed above. It has different names in different states. You may come across it as reemployment tax, state unemployment insurance (SUI), or SUTA.

*This document should not be assumed as legal advice. This information is subject to change, please contact with our team of attorneys to confirm.

Irmak Kocyildiz
Written by Irmak Kocyildiz

Related Articles

Form W-9 vs Form 1099
16 min
Legal
Form W-9 vs Form 1099

Table of Contents Form W-9 vs Form 1099What is Form W-9?What is Form 1099?Who Should Fill out W...

What Is W-4 Form And Who Needs It?
11 min
Legal
What Is W-4 Form And Who Needs It?

Table of Contents What Is W-4 Form And Who Needs It?What Is Form W-4?What is the purpose of the...

What is State Income Tax (SIT)?
7 min
Legal
What is State Income Tax (SIT)?

Table of Contents What is State Income Tax (SIT)?What is SIT?Form W-4 and State Income TaxState...