Your Ultimate Guide to Arkansas Payroll Taxes

Employers in Arkansas must handle both federal obligations, such as federal income tax and FICA taxes, and state payroll taxes. Understanding these responsibilities is crucial to ensure compliance and avoid penalties.

Since 2016, Arkansas has undergone significant tax reforms aimed at improving the business environment and simplifying tax compliance. Arkansas has two main payroll taxes: state unemployment insurance tax (SUI/SUTA) and state income tax. These taxes are administered by the Arkansas Department of Finance and Administration (DFA) and the Arkansas Department of Workforce Services.

New Hire Reporting Requirements

Employers must report new hires within 20 days of the start date. New employees are required to fill out an AR4EC form for state income tax withholding.

State Unemployment Insurance Tax (SUI/SUTA)

The SUI/SUTA tax provides economic security for unemployed workers. It is collected by the Arkansas Department of Workforce Services, which determines tax rates annually.

2024 Tax Rates for New Employers

• First Half of 2024: 2.025%
• Second Half of 2024: 2%

These rates apply for three years, after which an experience rating is assigned.

Federal Unemployment Tax Act (FUTA)

In addition to state unemployment taxes, employers must also contribute to federal unemployment taxes.

SUI Details

• Tax Rate: 0.225% to 10.125% (Jan-Jun 2024); 0.2% to 10.1% (Jul-Dec 2024)
• Taxable Wage Limit: First $7,000 per employee per year

Employers can manage Arkansas unemployment insurance through an online portal and find more information on unemployment insurance from the Arkansas Department of Commerce. 

Withholding personal income tax from your Arkansas employee

Personal income tax is an individual income tax on the earnings of Arkansas residents. Employers deduct the state income tax from employees’ wages, withhold the amount, and make payments to the state. 

The withheld amount can be paid to the state through the Arkansas online portal, and more information can be accessed from the Arkansas Department of Finance and Administration.

Recent Changes

SB 532 reduced the highest marginal income tax rate from 4.7% to 4.4% starting in 2024.

Income Tax Details

• Tax Rate: 0% to 4.4% based on Form W-4
• No taxable wage limit

Payroll Tax Due Dates in Arkansas

State Income Tax

Payments are due monthly on the 15th.

SUTA Payments

Payments are due quarterly on the following dates:

• April 30
• July 31
• October 31
• January 31 If a due date falls on a weekend or holiday, the next business day is the deadline.

Payment Methods

• Online Services: DFA's portal for state income tax or Arkansas Division of Workforce Services' Tax 21 portal for SUTA contributions
• Mailing Payments: State income tax payments can be mailed with form AR941M to DFA

Paying your Arkansas workers’ compensation

In addition to payroll taxes, Arkansas employers are responsible for paying workers’ compensation, insurance that provides medical benefits and financial relief to injured employees while performing their jobs. 

Unlike most other states, Arkansas only needs to purchase workers’ compensation coverage when you have three or more employees in the state. Workers’ compensation can be purchased from a qualified commercial carrier. If you need help finding a provider, browse the Arkansas Workers’ Compensation Commission.

Take note that your workers’ compensation insurance must comply with the state’s regulations for workers’ compensation.

Simplify US payroll tax compliance with Deel

While this introductory guide serves as a helpful starting point for payroll taxes in Arkansas, there are other rules and regulations to remain compliant. At Deel, we help companies navigate these requirements with our convenient US payroll solution. 

Request a demo and see how we help Arkansas employers streamline US payroll processes and ensure compliance with state regulations.