Stumped by SUTA: PEO Company to the Rescue

Stumped by SUTA: PEO Company to the rescue 

Filing and paying taxes often feels like battling a superhero, difficult and tiresome! Fortunately, to help you, the business owner, juggle running your business with paying corporate and payroll taxes there are PEO companies. But before explaining how PEO companies can help with taxes, let’s investigate unemployment taxes. 

Included in
payroll taxes are unemployment taxes to the state and to the federal government to pay for the benefits of those who are out of work. SUTA, the State Unemployment Tax Authority, deals with, as the name implies, the state unemployment tax. The amount charged is calculated based on a percentage of the wage an employee is due, and off the experience rate of your company. The tax is paid by you, the employer, without making a deduction from employees’ salaries. When calculating the SUTA tax, you are advised to also calculate the FUTA tax, the unemployment tax paid to the federal government. When this is done, you can get a credit to reduce the FUTA tax. In other words, understanding the SUTA tax can save you money! 

The money collected from the SUTA tax is put in the State Unemployment Trust Fund to pay unemployment benefits. Unfortunately, different states have different regulations for unemployment; the qualifications for receiving unemployment benefits, the length of receiving benefits, and the amount of benefits are different in Florida than in Colorado, for example. In turn, because every state administers unemployment payouts in their own way, their SUTA tax differs. If your business stretches into more than one state, you may be paying a SUTA tax rate of 5.4% in one state and 5% in one state. What is more, in some states (Alaska, New Jersey, and Pennsylvania) money is also collected from employees. Complicating tax filing further is the fact that the SUTA tax is variable, just like other forms of payroll taxes. The tax can be changed at any time, confusing employers who do not fully understand it. 

As stated previously, filing the SUTA tax with the FUTA tax can lead to a FUTA tax reduction; hence, saving you money. There are other benefits of properly filing the SUTA tax. For example, certain states will lower SUTA tax rates to new businesses. However, SUTA rates DO differ from state to state and it is possible that your new company will start with a higher rate and can have this adjusted as each year goes on. There can be a lot of confusion over different taxes.

small business owners who would prefer to spend their time managing their business instead of determining the changes in tax rates, consulting an expert can be incredibly beneficial. For example, Professional Employer Organizations, or PEOs, specialize in knowing tax laws and how they differ from state to state. Investigating PEO companies can save you time with administrative tasks such as taxes. Employee leasing services are not a new concept, but have been utilized for many years and have become creditable organizations for small businesses who understand the importance of focusing on their goods or services by offloading administrative tasks.

About the Author
Carolyn Stoll Sokol is a frequent contributor to PEOcompare and writes about issues that may affect small businesses.  She is a founder of which helps match small businesses with the
best PEO for their particular needs.  Her background is in marketing and communications, employee education and training, development of policies and procedures and the ongoing delivery of outstanding service to customers.

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