What payroll taxes do small businesses need to pay?

Payroll Taxes for Small Businesses in Arizona

Small businesses operating in Arizona must manage several payroll tax obligations to stay compliant and avoid penalties. Understanding these taxes ensures smooth payroll processing and accurate financial planning.

Federal Payroll Taxes

• Social Security Tax: Employers must withhold 6.2% of employee wages and match this amount.
• Medicare Tax: Employers withhold 1.45% of wages and contribute an equal amount.
• Federal Unemployment Tax Act (FUTA): Employers pay FUTA tax, generally 6% on the first $7,000 of each employee’s wages, with possible credits reducing the effective rate.
• Federal Income Tax Withholding: Employers are required to withhold federal income tax from employee wages based on IRS withholding tables and employee W-4 forms.

Arizona State Payroll Taxes

• Arizona State Income Tax Withholding: Employers must withhold state income tax based on Arizona withholding tables and employee Form A-4.
• Arizona Unemployment Insurance (UI): Employers pay unemployment insurance taxes based on their experience rating and taxable wage base, which varies annually.

Operational Considerations

• Registration: Register with the Arizona Department of Revenue and the Arizona Department of Economic Security to report and remit state payroll taxes.
• Reporting: Submit federal payroll tax reports using IRS forms such as 941 or 944, and state reports as required by Arizona agencies.
• Recordkeeping: Maintain accurate payroll records, including tax withholdings, payments, and employee classifications, for at least four years.
• Automation: Consider payroll software or services that automate tax calculations, filings, and payments to reduce errors and save time.
• Compliance Updates: Stay informed on changes to tax rates, wage bases, and filing requirements, as these can change annually.

As of 2026, these are the core payroll tax responsibilities for small businesses in Arizona. Proper management of these taxes supports compliance and efficient business operations.