Payroll tax in Arkansas: What employers need to know [2024]

The state of Arkansas is known for many things: the gorgeous Ozark Mountains, the lively city of Little Rock, and (perhaps most crucially for business owners) being pretty tax-friendly. This can come as a relief to employers, especially if you’re hiring not just in Arkansas, but also in multiple states.

Still, you have many responsibilities when it comes to taxes, including federal obligations—like federal income tax and the FICA taxes levied by the IRS—and state payroll taxes. Dealing with state-level payroll taxes can be extremely complicated since the rates and regulations vary from state to state—and if you don’t know the local tax laws, you can find yourself facing stiff penalties.

Despite its tax-friendly business environment, Arkansas is no exception to complex tax laws. Since 2016, the state has been undergoing a series of major tax reforms, so there’s a lot to keep track of! Follow along as we break down Arkansas’s state payroll tax laws, including the different types of taxes, their rates, who pays what, and filing deadlines.

The 2 Arkansas payroll taxes

There are two Arkansas state payroll taxes: state unemployment insurance tax—also known as SUTA or SUI—and state income tax. The Arkansas Department of Finance and Administration (DFA) and the Arkansas Department of Workforce Services are both responsible for administering payroll taxes at the state level. 

According to the state’s new hire reporting requirements, Arkansas employers must report new hires within 20 days of the individual’s start date. All new employees must also fill out an AR4EC, which tells employers how much state income tax they should be withholding during each pay period.

Below, we’ll review each type of state payroll tax in more detail.

State unemployment insurance tax

Arkansas state unemployment insurance (SUI or SUTA) tax is collected to provide economic security for employees who have recently lost their jobs due to circumstances beyond their control. The Arkansas Department of Workforce Services both collects SUI tax and determines the tax rates employers should pay each year. The SUI tax rate for new employers in 2024 is 2.025% for the first half of the year and 2% for the second half; this is the rate a new employer will pay for three years, after which the Arkansas Department of Workforce Services will assign them an experience rating and a new tax rate.

Under the Federal Unemployment Tax Act (FUTA), Arkansas employers typically must also contribute to federal unemployment taxes along with state ones.

Arkansas income tax

Arkansas residents are responsible for paying federal and state income taxes, which recently underwent some changes. At the start of 2024, the Arkansas Department of Finance and Administration (DFA) enacted SB 532, which reduced the highest marginal income tax rate from 4.7% to 4.4%. The DFA oversees the reporting, collection, and enforcement of Arkansas state income tax, and the rates are based on employees’ taxable wages.

SB 532 is just one example of how actively and frequently Arkansas’s tax laws change, so it’s crucial for business owners in the state to pay attention to state tax legislation. After all, employers are the ones responsible for withholding the right amount of state income taxes from each employee’s paycheck.

Remember: The amount of state income tax each person pays is based entirely on how much they make, as reflected on their AR4EC form. Tax withholding isn’t based on their filing status.

Navigating payroll tax laws can be challenging. This is especially true in Arkansas, with its complex and ever-changing tax laws. Fortunately, Rippling’s payroll compliance software makes things easy. Rippling automatically calculates your taxes and submits your tax forms and payments for you—monitoring tax regulations at the federal and Arkansas state levels to ensure you’re always compliant. If you’re looking to automate even more of the payroll tax process, Rippling PEO takes it a step further: It can register and maintain your state tax accounts for you.

Payroll tax due dates in Arkansas

Arkansas employers must pay state income taxes to the DFA on a monthly basis. Payments must be submitted on the 15th of each month. Employers must also make SUTA payments to the Arkansas Division of Workforce Services on a quarterly basis. The deadlines are as follows:

• First quarter (January-March): Due April 30
• Second quarter (April-June): Due July 31
• Third quarter (July-September): Due October 31
• Fourth quarter (October-December): Due January 31

If one of these dates falls on a weekend or a legally recognized holiday, you must complete your tax filing responsibilities by the following business day. 

How to submit payroll taxes in Arkansas

Now that we’ve covered both types of payroll taxes and payment deadlines, you’re probably wondering how to remit your payments. The state of Arkansas has a number of options for making a payment. Below, we’ll go over your choices.

Enroll in e-Services 

Arkansas employers who want a simple, fast, and secure way to manage their payroll taxes should visit the DFA’s website. The DFA has an online portal where employers can remit state income tax contributions, and the Arkansas Division of Workforce Services has Tax 21, an online portal where employers can make their SUTA contributions. Each site has instructions about how to set up an account and make your payments, as well as answers to FAQs.

Mail in a check or money order

Unlike many other state tax agencies, the DFA still allows state income tax payments to be made by mail. If you want to mail your payment using a check or money order, you’ll need to fill out form AR941M. The check or money order should be made payable to the Department of Finance and Administration and sent to the following address:

Individual Income Tax Section
Withholding Branch
P.O. Box 9941
Little Rock, Arkansas 72203-9941

Rippling’s full-service payroll software

Searching for a payment option that’s even easier? Look no further than Rippling’s payroll software. It’s so powerful it practically runs itself. Rippling automates all your compliance work and files your federal, Arkansas state, and local payroll taxes at the right time with the IRS and the Arkansas Department of Finance and Administration (DFA).

FAQs about Arkansas payroll taxes

Are there local tax laws in Arkansas?

Yes. According to the Arkansas Department of Finance and Administration (DFA), the majority of cities and counties in the Natural State have local taxes. At last count, there were over 300 local taxes! These aren’t collected directly by the municipal or county governments themselves, however. The state collects the money and then distributes it back to the local governments. 

Can your tax returns be audited in Arkansas?

Yes. The DFA has the authority to audit state residents’ income tax returns to ensure taxpayers are paying the correct amount of taxes. 

What’s the border city exemption?

Residents of Texarkana are permitted to claim the border city exemption. In other words, they don’t have to pay any Arkansas income tax on income they earn in the city of Texarkana.

Are nonprofit organizations subject to payroll taxes in Arkansas?

Nonprofits that qualify for a tax exemption under Section 501(c)(3) of the Internal Revenue Code (IRC) are exempt from paying most Arkansas state taxes, including corporate income tax. However, most nonprofits must still pay the state unemployment insurance tax (SUI). Organizations eligible for an exemption under Section 501(c)(3) can choose one of two options for meeting this obligation: They can pay for SUTA like a regular business or select self-insurance.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.