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Insurance offered through OnPay Insurance Agency, LLC (CA License #0L29422)
Updated: February 22, 2024
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.
Federal payroll taxes for Arkansas employers
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.
- First, calculate gross wages, which is simply the amount of money an employee has earned during the last pay period.
- For hourly employees, multiply the number of hours worked by their pay rate — and make sure you don’t forget to take overtime into consideration.
- For salaried employees, divide each employee’s annual salary by the number of pay periods you have over the course of a year.
- Bonuses, commissions, and tips are all part of gross wages as well.
- Subtract any pre-tax withholdings. If your employees have 401(k) accounts, flexible spending accounts (FSA), health savings accounts (HSA), or any other pre-tax withholdings, subtract them from gross wages prior to applying payroll taxes.
- Deduct federal income taxes, which can range from 0% to 37%. We won’t get into the nitty-gritty here, but you can find further withholding information through the IRS Publication 15-T.
- Deduct and match any FICA taxes to cover Social Security and Medicare taxes:
- For Social Security tax, withhold 6.2% of each employee’s taxable wages until they have earned $168,600 in a given calendar year. As an employer, you must match this tax.
- For Medicare tax, withhold 1.45% of each employee’s taxable wages until they have earned $200,000 in a given calendar year. You must also match this tax. For employees who more than $200,000 per year, you’ll need to withhold an Additional Medicare Tax of 0.9%, which brings the total employee Medicare withholding above $200,000 to 2.35%. You don’t need to match the Additional Medicare Tax. Only employees are responsible for paying this tax.
- Pay FUTA unemployment taxes, which is 6% of the first $7,000 of each employee’s taxable income. FUTA taxes come with a huge caveat that you should know about. You can claim a tax credit of up to 5.4% for state unemployment tax you pay, as long as you pay in full and on time. It’s an easy way to save a whopping 90%, so make sure you take advantage! Only you as the employer are responsible for paying FUTA taxes, so you don’t need to withhold FUTA from your employees’ paychecks.
- Subtract any post-tax deductions. Most of your employees won’t have any post-tax deductions, but if they do, you will need to withhold things like court-ordered wage garnishments, child support, etc. Make sure you take these into consideration as well.
Arkansas state payroll taxes
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 2024 tax rates will range from 2% on the low end to 4.4% on the high end. Employees who make more than $84,500 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.
Arkansas state unemployment insurance
As an employer in Arkansas, you have to pay unemployment insurance to the state. The 2024 rates range from 0.1% to 14.0% on the first $7,000 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!
Now cut those paychecks!
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.
Do you have employees nearby too? These might be helpful.
More Arkansas payroll tax resources:
If you would like to learn more about Arkansas payroll taxes, here are some helpful links that we think can be useful:
Arkansas Department of Workforce Services (855) 225-4440 | UI Employer Information | UI Employer Services
Arkansas Department of Finance and Administration (501) 682-7290 Withholding@dfa.arkansas.gov | Withholding Tax | Tax Due Dates
More helpful payroll calculators
With the calculator at the top of this page, Arkansas employers can quickly calculate gross pay, net pay, and deductions (and feel confident when cutting paychecks). But sometimes, businesses have to do a little more number crunching. For example, do you occasionally give bonuses to high-performing employees? Remember that these payments are considered supplemental wages in the eyes of the IRS, and, therefore, subject to tax withholding. Furthermore, as employees come and go, you may need to occasionally calculate some final paychecks. So, if you can use a little more help managing the math, check out some of the calculators listed below.