Your Ultimate Guide to Texas Payroll

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.

The State Unemployment Insurance (SUI) Tax Rates in Texas for 2024 are structured with several components, each contributing to the overall tax rate that employers must pay. Here's a detailed breakdown:

• General Tax Rate (GTR): This is calculated based on the employer's benefit ratio and the replenishment ratio, which for 2024 is set at 1.22 percent. The benefit ratio is determined by the amount of unemployment claims charged to the employer's account compared to their taxable payroll.
• Replenishment Tax Rate (RTR): For 2024, the RTR is 0.15 percent. This rate has been reduced by 0.10 percent to offset the Employment and Training Investment Assessment (ETIA).
• Obligation Assessment Rate (OA): There is no Bond Obligation Assessment Rate for the year 2024.
• Deficit Tax Rate (DTR): There is also no Deficit Tax Rate for 2024.
• Employment and Training Investment Assessment (ETIA): This is assessed at 0.10 percent of the wages paid by an employer. It is designed to fund employment and training programs in the state.

The minimum tax rate for employers in 2024 is 0.25 percent, and the maximum tax rate is 6.25 percent. These rates apply to the first $9,000 that each employee earns during the calendar year. This structure ensures that the tax burden is shared and supports the state's unemployment insurance program.

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.

Payroll tax deadlines in Texas

Employers in Texas must adhere to the following schedule for submitting quarterly wage reports and tax payments:

Note: If due dates fall on a weekend or legal holiday, the deadline extends to the next business day.

Submission process for payroll taxes

To manage unemployment taxes online, Texas employers can utilize the Unemployment Tax Services (UTS) portal. Here’s how:

• Payment Methods: Employers can pay via ACH debit or credit card. Those with hardship waivers may opt to mail their payments.
• Online Management: Employers must register and create an account on UTS to file or adjust wage reports and manage tax payments. Payments can be scheduled up to the end of the current month and can be modified or canceled before final processing.

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.

Texas provides comprehensive workers' compensation benefits, which include:

• Income Benefits: Replace part of lost wages due to work-related injuries or illnesses. Types include Temporary Income Benefits (TIBs), Impairment Income Benefits (IIBs), Supplemental Income Benefits (SIBs), and Lifetime Income Benefits (LIBs)
• Medical Benefits: Cover necessary medical care related to the injury or illness
• Burial Benefits: Assist with funeral expenses
• Death Benefits: Help families replace lost income due to a work-related death
• Maximum Benefits: Linked to the state average weekly wage (SAWW), with TIBs and LIBs at 100% of SAWW, and IIBs and SIBs at 70% of SAWW
• Minimum Benefits: Set at 15% of the SAWW

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.