What payroll taxes do small businesses need to pay?

Payroll Taxes for Small Businesses in Arkansas

Small businesses operating in Arkansas must manage several payroll tax obligations to stay compliant and maintain smooth operations. Understanding these taxes helps ensure proper withholding, reporting, and payment.

Federal Payroll Taxes

• Social Security Tax: Employers must withhold 6.2% of each employee’s wages and match this amount.
• Medicare Tax: Employers withhold 1.45% of wages and match it equally.
• Federal Income Tax Withholding: Employers withhold based on employee W-4 forms and IRS tax tables.
• Federal Unemployment Tax Act (FUTA): Employers pay FUTA tax, generally 6% on the first $7,000 of wages per employee, with possible credits reducing the rate.

Arkansas State Payroll Taxes

• State Income Tax Withholding: Employers must withhold Arkansas state income tax from employee wages according to state withholding tables.
• State Unemployment Insurance (SUI): Employers pay SUI tax based on their assigned rate and taxable wage base, which funds unemployment benefits.

Operational Considerations

• Registration: Register with the Arkansas Department of Finance and Administration and the Arkansas Division of Workforce Services to manage withholding and unemployment taxes.
• Reporting: File regular payroll tax reports, including federal forms like 941 or 940 and state unemployment reports.
• Recordkeeping: Maintain accurate payroll records for at least four years to comply with federal and state audit requirements.
• Automation: Use payroll software or services to automate tax calculations, withholding, and filing to reduce errors and save time.
• Compliance: Stay updated with any changes in tax rates or wage bases as of 2026 by regularly consulting official Arkansas and IRS resources.