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Your Ultimate Guide to Texas Payroll

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

Jemima Owen-Jones
Written by Jemima Owen-Jones
August 7, 2023

Key takeaways

  1. Employers must pay unemployment insurance in the state of Texas.
  2. Texas employers do not need to withhold any personal income tax.
  3. Texas does not require employers to have workers’ compensation or state disability insurance, although it is still a common practice among employers to limit liability.

Employers must navigate various regulations and requirements to ensure proper payroll withholding in each US state. This guide explains what employers need to pay and withhold from payroll in Texas, including unemployment insurance, personal income tax, and workers’ compensation. 

Paying unemployment insurance 

On top of withholding federal taxes such as Medicare and Social Security taxes, employers are responsible for withholding and paying certain Texas state taxes from employees’ payroll. These taxes together are referred to as employer payroll taxes or payroll withholding. One of the taxes you must pay is unemployment insurance (UI). 

Unemployment Insurance is a national program administered by the US Department of Labor and provides temporary payments to people who are unemployed through no fault of their own. You can manage your Texas unemployment insurance through an online portal. For more information on paying your unemployment insurance, refer to the Texas Workforce Commission.

Withholding personal income tax from your Texas employee 

Texas does not have any personal income tax; therefore, employers do not have to withhold any personal income tax after hiring their first employee in the state.

Paying your Texas workers’ compensation

Texas does not require employers to have workers’ compensation or state disability insurance after hiring their first employee in the state. However, many companies in Texas still purchase workers’ compensation or disability insurance to limit liability. 

Moreover, employees can opt to purchase a Texas Income Protection Plan (TIPP) using withholdings from their payroll. 

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Texas payroll taxes, payroll compliance, 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 streamline 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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