Article
3 min read
Comprehensive Guide to Payroll Taxes in Arkansas
US payroll
Author
Shannon Ongaro
Last Update
February 26, 2025
Published
August 04, 2023
Key takeaways
- Arkansas has over 300 local taxes, which are collected by the state and distributed to local governments. The DFA has the authority to audit income tax returns to ensure compliance.
- Residents of Texarkana are exempt from paying Arkansas income tax on income earned within the city limits.
- Section 501(c)(3) nonprofits are exempt from most state taxes but must pay state unemployment insurance (SUI). Nonprofits can choose between making the State Unemployment Tax Act (SUTA) contributions like regular businesses or selecting self-insurance.
Employers in Arkansas must handle both federal obligations, such as income tax and Federal Insurance Contributions Act (FICA) taxes, and state payroll taxes. Understanding these responsibilities is crucial to ensure compliance and avoid penalties.
Since 2016, Arkansas has undergone significant tax reforms aimed at improving the business environment and simplifying tax compliance. Arkansas has two main payroll taxes: SUI and state income tax.
These taxes are administered by the Arkansas Department of Finance and Administration (DFA) and the Arkansas Department of Workforce Services.
New Hire Reporting Requirements
Employers must report new hires or rehires within 20 days of the start date. New employees are required to fill out an AR4EC form for state income tax withholding.
State Unemployment Insurance Tax (SUI/SUTA)
The SUI/SUTA tax provides economic security for unemployed workers. It is collected by the Arkansas Department of Workforce Services, which determines tax rates annually.
2025 Tax Rates for New Employers
New employers are automatically assigned an SUI rate of 2% in 2025. This rate applies for three years, after which an experience rating is assigned.
Federal Unemployment Tax Act (FUTA)
In addition to state unemployment taxes, employers must also contribute to the Federal Unemployment Tax Act (FUTA) program. The rate for 2025 is 6% on the first $7000 you pay employees in wages during the calendar year.
If you pay SUI, you can receive up to 5.4% credit on your FUTA taxes when filing Form 940.
SUI Details
The SUI rate for 2025 ranges from 0.2% to 10.1% on a taxable wage base of $7000 per employee. There’s an additional administrative fee of 0.1%.
Employers can manage Arkansas unemployment insurance through an online portal and find more information on unemployment insurance from the Arkansas Department of Commerce.
Withholding personal income tax from your Arkansas employee
Arkansas residents owe personal income tax (PIT) on their earnings. Employers deduct PIT from employees’ wages, withhold the amount, and make payments to the state.
The withheld amount can be paid to the state through the Arkansas online portal, and more information can be accessed from the Arkansas DFA website.
Personal income tax rate
Arkansas has a progressive tax system. You calculate each employee’s withholding based on their income level and a formula.
Here are the tax rates for 2025:
| Income band | Rate |
|---|---|
| $0 to $5,499 | 0% |
| $5,500 to $10,899 | 2% |
| $10,900 to $15,599 | 3% |
| $15,600 to $25,699 | 3.4% |
| $25,700 or more | 3.9% |
Deel US Payroll
Payroll Tax Due Dates in Arkansas
State Income Tax
There are two types of filers: annual and monthly.
Most employers in Arkansas are monthly filers and must remit PIT by the 15th of the month following a reporting period.
Employers with less than $1000 in employee tax withholdings in the calendar year can pay annually. The due date is the 31st of the following January.
SUTA Payments
Payments are due quarterly on the following dates:
- April 30
- July 31
- October 31
- January 31 If a due date falls on a weekend or holiday, the next business day is the deadline.
Payment Methods
- Online Services: DFA's portal for state income tax or Arkansas Division of Workforce Services' Tax 21 portal for SUTA contributions
- Mailing Payments: State income tax payments can be mailed with form AR941M to DFA
Paying your Arkansas workers’ compensation
In addition to payroll taxes, Arkansas employers are responsible for paying workers’ compensation, insurance that provides medical benefits and financial relief to injured employees while performing their jobs.
Unlike most other states, Arkansas only needs to purchase workers’ compensation coverage when you have three or more employees in the state. There are exceptions so businesses are advised to check before hiring their first workers.
Take note that your workers’ compensation insurance must comply with the state’s regulations for workers’ compensation.
Simplify US payroll tax compliance with Deel
While this introductory guide serves as a helpful starting point for payroll taxes in Arkansas, there are other rules and regulations to remain compliant. At Deel, we help companies navigate these requirements with our convenient US payroll solution.
Request a demo and see how we help Arkansas employers streamline 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.
About the author
Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.
