The Texas Workforce Commission (TWC) set the 2021 employer’s unemployment insurance (UI) tax rate in mid-June after a four-month delay as the state waited to see how the economic recovery progressed before setting Texas State Unemployment Tax Act (SUTA) Rates. The rate set is retroactive to January 1 for all employers in the state.
The TWC announced it was setting the 2021 UI rate at pre-pandemic levels to protect the Texas Unemployment Compensation Trust Fund solvency while “reducing tax burden on Texas businesses”.
The TWC announced that the UI replenishment tax rate would be 0.18 percent and the deficit tax rate would be 0.0 percent. The Obligation Assessment was set to 0.03 percent to recover any federal interest due on Title XII loans in the fall.
The combination of the replenishment rate and obligation assessment equals the 2020 replenishment rate of 0.21 percent.
Texas Unemployment Tax Rate Range Remains the Same
While the Texas unemployment tax rate range remains the same for 2021, from a minimum of 0.31 percent to a maximum of 6.31 percent, it is not all good news for employers. TWC had given Texas employers the direction that COVID-related charges would not go against the state fund and as of today that is not the case - this will ultimately drive higher rates across the state for all employers.
“Despite having the same range of rates, 2021 tax rates are slightly less favorable due to an increase in several of the components used to calculate the final rate,” reports Thomas & Company.
Factors making the rates less favorable include:
- Replenishment Ratio increasing from 1.32 to 1.36
- The Interest Tax Rate increasing from 0.00 percent to 0.03 percent
- Unemployment Obligation Assessment Rate increasing from 0.00 percent to 0.03 percent.
The tax rate range is different for all businesses based on their General Tax Rate (GTR), a tax that reflects a company's individual responsibility for repaying benefits paid to former workers.
The GTR is the experience-rated portion of UI tax. It is called experience-rated because it is based on benefits that have been paid to former employees of a business and charged to their account, known as chargebacks.
The taxable wage base remains at $9,000 for 2021.
Updated 2021 Unemployment Tax Wage Report and Payment Schedule
Along with the announced 2021 UI tax rates came an updated 2021 unemployment tax wage report and payment schedule.
Tax Payments for the 1st and 2nd quarters are extended as follows:
- The 1st quarter 2021 tax payment is due by August 2, 2021.
- The 2nd quarter 2021 tax payment is due by September 30, 2021.
- The 3rd quarter 2021 tax payment is due by November 01, 2021.
- The 4th quarter 2021 tax payment is due by January 31, 2022.
- Tax reports for 2021 must be filed by their original due date:
- The 1st quarter 2021 tax report must be filed by May 7, 2021.
- The 2nd quarter 2021 tax report must be filed by August 2, 2021.
- The 3rd quarter 2021 tax report must be filed by November 1, 2021.
- The 4th quarter 2021 tax report must be filed by January 31, 2022.
Employers can review the tax rate online using the Unemployment Tax Services (UTS).
Once you have logged into your account on the UTS system, click on the “Account Info” tab at the top of the page, and then select the “Tax Rate Summary” link in the Quick Links box on the left to view your tax rate information for the last several years.
Texas Avoided Payroll Tax Hikes Other States May See
The COVID-19 pandemic drain on state UI funds has many businesses around the country preparing for payroll tax hikes.
“In response to the COVID-19 pandemic, state unemployment insurance (UI) benefits, funded through payroll taxes, were exhausted. As a result, the percentage of employees' wages that employers pay for UI programs is expected to at least double over the next two to three years, benefits advisors predict,” wrote Stephen Miller in SHRM in May.
So far, Texas, which paid $8.7 billion in state unemployment compensation benefits on behalf of experience rated employers between Oct. 1, 2019 and September 30, 2020, has avoided any sharp payroll tax increases and has opted for stability in the near-term.
“This decision gives stability and predictability to our UI tax structure,” said TWC Commissioner Representing Employers Aaron Demerson in June. “Texas employers and Business leaders look forward to that stability especially after a year of rampant uncertainty. This gives them the capacity they need to hire, expand and get Texas’ economy back on track.”
Since 2012, the Texas taxable wage base remains at $9,000 for UI and the maximum UI Texas unemployment tax rate has fallen with the minimum going from 0.61 percent to 0.31 percent and the maximum falling from 7.58 percent to 6.31 percent.
During that same timeframe the average experience tax rate fell from 1.87 percent in 2012 to 0.93 percent last year.
Payroll management can be confusing and time consuming with issues like Texas SUTA Rates. Partnering with a PEO like Employer Flexible allows you to concentrate on the more profitable parts of your business.
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