Unemployment Insurance Tax (FUTA/SUTA): Texas

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert, The Payroll Advisor

Summary

• Texas uses the common law test for determining a worker's status for unemployment insurance coverage purposes. See Common Law Test.
• Texas defines wages for state unemployment insurance (SUI) purposes as all compensation paid for personal services, including the cash value of all compensation paid in any medium other than cash, and gratuities received by any employee in the course of employment to the extent that the gratuities are considered wages under the federal UI law. There are several exceptions to the term wages in Texas UI law. See SUI Taxable Wages.
• Wages are withheld for SUI up to the annual taxable wage base. See Taxable Wage Base.
• Newly liable employers begin with a predetermined tax rate set by the Texas UI law. See Contribution Rates.
• An employer's SUI rate is the sum of five components: General Tax Rate, Replenishment Tax Rate, Unemployment Obligation Assessment, Deficit Tax Rate, and Employment and Training Investment Assessment. See Experience Rating Method.
• The Texas anti-SUTA dumping law mirrors the federal SUTA Dumping Prevention Act. There are some differences in penalty provisions, however. See SUTA Dumping.
• Texas employers have the option of making voluntarily contributions to lower their SUI tax rates. In addition, two or more reimbursing employers may form a Group Account in order to share the cost of reimbursing the Texas Workforce Commission for unemployment benefits paid to former employees. See Voluntary Contributions; Joint or Combined Accounts.
• Employers are required to file quarterly reports of employee wages subject to SUI. Some employers must file these reports electronically. Penalties are imposed for noncompliance. See Quarterly Reporting Requirements.
• An employer's account will be charged for overpayments caused by the employer's failure to properly respond to requests for information about benefit claims. See Benefit Overpayments.
• All employers must keep true and accurate employment and payroll records for each individual who performs services for the employer. The records must be preserved for four years. See Recordkeeping Requirements.
• Completing and submitting the Multiple Worksite Report (BLS 3020) is voluntary in Texas. See Multiple Worksite Reporting.