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Your Ultimate Guide to Arizona Payroll

Managing payroll in Arizona? Read our state-by-state guide to US payroll taxes to learn what you must withhold and deduct from employee wages.

Shannon Hodgen
Written by Shannon Hodgen
July 24, 2023
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Key takeaways

  1. In Arizona, unemployment insurance is not typically withheld from employees’ wages. Instead, the responsibility for paying UI falls on employers.
  2. Arizona employers must carry workers’ compensation insurance to cover employees in the event of a job-related incident.
  3. Employers are responsible for withholding personal income tax from employee wages, as well as deducting state income tax and remitting them to the Arizona Department of Revenue.
Employers have to navigate a variety of regulations and requirements to ensure proper payroll withholding in each US state. This guide serves as an introduction to what employers need to pay and withhold from payroll in Arizona, including unemployment insurance, personal income tax, and workers’ compensation. 

Paying unemployment insurance

Unemployment insurance, often abbreviated as UI, serves as a crucial safety net for workers facing unemployment due to external factors beyond their control. It provides much-needed financial support during challenging periods of joblessness.

In Arizona, the responsibility for paying unemployment insurance typically falls on employers who must make contributions to the state’s unemployment insurance fund based on their employees’ wages. UI is not usually withheld from the employee’s wages in Arizona, but the cost falls on the shoulders of employers alone. Employers can make online payments through the state online portal.

For more information, you can visit the Arizona Department of Economic Security online.

Unlike UI, other federal taxes are withheld from employees’ wages in Arizona. These include Medicare and Social Security, among other employer payroll taxes, to fund various government programs and benefits.

Withholding personal income tax from your Arizona employee

Arizona employers are required to withhold personal income tax for their employees’ wages. The state follows a system of withholding income tax from employees’ paychecks to cover individual income tax liabilities. These taxes are referred to as employer payroll taxes or payroll withholding.

Employers are also responsible for calculating and deducting the appropriate amount of state income tax from each employee’s paycheck and remitting the amount to the Arizona Department of Revenue. The amount can be paid through Arizona’s online portal.

For more information on paying taxes in the state, visit the Arizona Department of Revenue.

Paying your Arizona workers’ compensation

Employers in Arizona must be aware of their obligations regarding workers' compensation, a form of insurance that provides medical benefits and wage replacement to employees who suffer job-related injuries or illnesses.

As an employer, you must carry workers’ compensation insurance to cover your employees in case of such incidents. Failure to provide the necessary coverage can lead to severe penalties.

By complying with the state’s workers' compensation laws, you ensure the well-being of your employees and protect your business from potential legal and financial repercussions. Workers’ compensation is typically purchased from a qualified commercial carrier in the state, and the Arizona claims division can help you find a qualified commercial carrier.

It’s important to verify that your workers’ compensation insurance complies with state regulations.

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Arizona payroll taxes, federal and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel.

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can simplify your US payroll processes and ensure compliance with state regulations.

Disclaimer: This article is provided for general informational purposes and should not be treated as legal or tax advice. Consult a professional before proceeding.

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