Updated January 11, 2021
Fried catfish, fresh biscuits, and a healthy portion of chocolate gravy. If that doesn’t perk up your appetite, nothing will. Arkansas may be known for its old-fashioned comfort food, but as an insider, you know it’s a whole lot more than that. That’s why you started a small business here. After all, it’s called the Land of Opportunity for a reason. And whether you strive to be just like that Sam Walton guy, or prefer to keep your small business small, there is one thing that you and the quarter million other small business owners in Arkansas can agree upon: you’d much rather spend your spare time watching the Razorbacks play than worry about payroll taxes.
We also want you to spend more time watching football and less time stressing about payroll taxes, so we went ahead and designed a nifty payroll calculator that can figure out all of the federal and Arkansas state payroll taxes for you and your employees. All you have to do is input wage and W-4 information for each employee into the calculator, and it will do the rest.
First and foremost, let’s talk about federal payroll taxes. Here’s a quick rundown of the components that go into federal payroll tax withholdings. If you would like a more detailed explanation on all of the steps below, head on over to our comprehensive step-by-step guide.
Now that we’ve gone through federal payroll taxes, let’s look at Arkansas state income taxes. The state charges a progressive income tax, broken down into six tax brackets. The 2020 tax rates range from 2% on the low end to 6.6% on the high end. Employees who make more than $79,300 will hit the highest tax bracket.
There are no local taxes, so all of your employees will pay the same state income tax no matter where they live.
As an employer in Arkansas, you have to pay unemployment insurance to the state. The 2021 rates range from 0.4% to 14.3% on the first $10,000 in wages paid to each employee in a calendar year.
If you’re a new employer (congratulations on getting started!), you pay a flat rate of 3.1% (this is including a 0.3% stabilization tax).
Remember to pay in full and on time so that you can save 90% on your FUTA tax!
That’s all she wrote! You’ve checked payroll taxes off your to-do list so you can focus on growing your business. Once each employee’s net pay is calculated (after taking deductions and withholdings into consideration), you’re good to go.
All you have to worry about is getting your employees paid on time as well as setting aside whatever you owe in FICA and unemployment taxes. Those numbers can add up quickly!
You will need to fill out Form 941 to file federal taxes on a quarterly basis, and Form 940 to report your annual FUTA liabilities. You can pay taxes online using the EFTPS payment system. All the IRS employment tax due dates can be found here.
If you would like to learn more about Arkansas payroll taxes, here are some helpful links that we think can be useful: