Pennsylvania SUI Taxes
Employers in Pennsylvania have to pay both federal and state payroll taxes. This includes Pennsylvania unemployment insurance.
What is SUI tax?
SUI stands for state unemployment insurance and is a commonly used term in payroll and accounting.
Pennsylvania SUI is officially called UC tax or unemployment compensation tax.
Both SUI and UC tax mean the same thing. The reason that unemployment tax is often called unemployment insurance is that the rate you pay as an employer depends on your history of unemployment claims.
How much does Pennsylvania SUI cost employers?
The employer pays unemployment insurance based on the first $10,000 in wages earned by each employee. Your tax rate varies based on your history of unemployment claims.
If your employees have received more in unemployment benefits than you’ve paid into the system, your unemployment insurance will increase. If you’ve paid in more than employee claims, your rate will decrease.
Pennsylvania unemployment insurance tax rates usually range from just over 2% to about 10.5%.
A new employer will usually start at 3.75% except construction industry employers typically start at or near the maximum rate. You normally keep the initial rate for two years before you start receiving a calculated rate based on your unemployment claims.
Do employees pay unemployment tax?
Employees pay a separate SUI tax of about 0.06% to 0.09%. Employers are responsible for collecting this tax through payroll withholding.
Employees will see PA SUI as a withholding line item on their paystub.
Employers cannot withhold the employer portion of SUI taxes from employee wages.
Can employers appeal their UC tax rate?
You should receive a Form UC-657 Contribution Rate Notice by December 31st each year. This notice states what you’ll pay in the upcoming calendar year.
You usually have 90 days to appeal changes to your tax rate. Remember that SUI tax is mostly a mathematical calculation, so you’ll usually need to show why the state’s math is wrong.
Does Pennsylvania have state disability insurance?
Pennsylvania doesn’t have a separate state disability insurance payment or tax like some other states do.
Pennsylvania also doesn’t have a state family leave insurance tax.
How do you pay Pennsylvania unemployment insurance?
You usually need to file a quarterly report with the Pennsylvania Department of Labor. The report includes things like your number of employees and wages paid.
UC tax is payable to the Department of Labor. UC tax is separate from payroll tax returns and income tax withholding paid to the Pennsylvania Department of Revenue or city governments.
You can file and pay online using the Pennsylvania Unemployment Compensation Management System. If you owe $5,000 or more for a reporting period, you must pay online.
Many payroll services take care of both your UC tax and income tax withholding. However, you should still be aware of both steps in case your payroll provider doesn’t or you switch payroll services.
Where do you get a Pennsylvania UC account number?
New businesses in Pennsylvania need to register online with the Department of Revenue. The online registration takes care of multiple steps including giving you your Pennsylvania Unemployment Compensation account number.
You’ll need your account number to file and pay UC tax or to allow your payroll provider to do it for you.
What is a voluntary contribution?
A voluntary contribution is when you pay an additional amount above your SUI tax due. The purpose is to help build up your reserves to avoid a tax rate increase or to lower your SUI tax.
What is an SUI tax audit?
Like other types of taxes, Pennsylvania periodically audits SUI taxes to make sure you’re paying what you should. There are two potential ways you can be audited.
First, you may be randomly selected for an audit in any given year.
Second, you may be audited if you fail to report employees, have made previous errors, are in an industry where reporting errors are common, or the state has reason to believe you reported your SUI tax incorrectly.
What happens in an audit?
If you’re selected for an audit, you’ll usually be asked for supporting documentation such as employment records and employee timesheets. Pennsylvania law generally gives state auditors the right to review any business records that show what you paid your employees.
Can you be audited if you only have independent contractors?
It’s common for businesses to misclassify employees as independent contractors to avoid paying SUI tax and other taxes.
Pennsylvania may conduct audits to make sure you’re properly classifying your workers. This could be due to random selection, a worker complaint, or other information the state has.
What happens if you don’t pay SUI tax?
If you don’t pay SUI tax, there are several penalties that can apply.
- Failing to file a quarterly UC tax report: 15% of the amount due with a minimum of $125 and a maximum of $450.
- Interest: Interest is set annually by the secretary of revenue and is at least 12%.
- Returned payment fee: If your payment is returned, the penalty is 10% of the payment with a minimum of $25 and a maximum of $1,000.
- Not filing electronically: If you don’t file electronically if you’re required to, there is a penalty of 15% of the amount due with a minimum of $125 and a maximum of $450. If there is a reason you can’t use the online system, you can request a waiver of the online filing rule.
- Not paying electronically: If you don’t pay online when required to, the penalty is 10% of the payment with a minimum of $25 and a maximum of $1,000.
In addition, your UC contribution rate will increase by 3% until you pay the late taxes, penalties, and interest. For example, if you normally pay 5%, you’ll have to pay 8%.
It’s usually better to pay late taxes as soon as you can to reduce the penalties and interest you’ll have to pay.
If your taxes remain delinquent, Pennsylvania may place a lien on your business assets. Pennsylvania may also use the Treasury Offset Program to seize your federal tax refund.
In addition, willfully failing to file UC returns and pay UC contributions is a crime.
