Payroll tax in Tennessee: What employers need to know [Updated 2024]
As certain as cowboy boots and country music in Nashville, payroll taxes cannot be avoided by business owners in Tennessee. Apart from FICA taxes like Medicare taxes and Social Security tax, companies must also pay state payroll taxes. However, these rules vary from one state to another, so it's crucial to be knowledgeable about tax laws in all the states where your employees work.
Tennessee has a straightforward tax system with no state income tax, one of nine states, and a single-rate corporate income tax. While it may look easy from a tax structure standpoint, companies must clearly understand tax obligations, including income tax rates, labor laws, and payment deadlines, to avoid penalties from the IRS and the Tennessee Department of Revenue.
About Tennessee payroll taxes
As an employer in Tennessee, it's important to know that the Tennessee Department of Revenue oversees the collection and administration of state payroll taxes. When you hire a new employee, you must start paying payroll taxes on their first day of employment, including Social Security tax, Medicare taxes, and unemployment insurance tax. Tennessee has no local payroll taxes, nor is there a state income tax.
It's also your responsibility to withhold federal income tax from your employee’s wages based on their W-4 forms before they receive their take-home pay. Employers in Tennessee must pay state payroll taxes for unemployment and disability insurance on the first $7,000 of pre-tax wages paid to each employee annually.
Unemployment insurance tax
If an employer has even just one employee in Tennessee, they must pay state unemployment taxes, regardless of the length of employment or payroll amount. If you are responsible for paying these taxes, the Department of Labor and Workforce Development will assign you a Tennessee unemployment eight-digit employer account number, with new employers paying a flat rate of 2.7%.
Tennessee employers must pay state and federal unemployment taxes under the Federal Unemployment Tax Act (FUTA) per pay period.
Who pays
Employer
Tax rate
0.01%-10.00%
Taxable wage limit
First $7,000 per employee, per year
Maximum tax
$700 per employee, per year
Payroll tax due dates in Tennessee
The Tennessee Department of Labor and Workforce Development requires that wage and premium reports be submitted to the Department quarterly and are due within one month after the end of each calendar quarter. The Premium Report includes fields to report the number of employees on an employer's payroll in each month of the quarter.
- 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
The penalty for late payment of employer taxes is calculated at a monthly rate of 5% or any fraction thereof, starting from the due date until the taxes are paid. The maximum penalty is 25% of the taxes owed, while the minimum is $15.
How to submit payroll taxes in Tennessee
Whether you’re a small business owner or a corporation in Tennessee, it's crucial to understand the tax deductions and payment deadlines to comply with local laws. Here's how to submit payroll taxes.
File electronically
Starting January 2019, Tennessee employers must submit their quarterly premium and wage reports electronically according to state law. Filing can be done through TNPAWS, the TN Premium, and the Wage Reporting System.
Failure to comply with this law can result in penalty charges. After submitting the report, employers can choose to pay their premiums directly or send an email request to the account holder. You can make payments in ACH Debit or ACH Credit.
Rippling’s full-service payroll software
If you're looking for a hassle-free payment option, Rippling makes payroll processing a breeze, even calculating the correct taxes every time your employee moves. With Rippling, all your compliance work is automated, and your federal and Tennessee state payroll taxes are filed on time while keeping up with the latest tax regulations.
FAQs about Tennessee payroll taxes
Are there local payroll tax laws in Tennessee?
No, Tennessee does not have any local payroll taxes.
Is there a Tennessee income tax?
No, there’s no income tax withholding from your taxable wages in Tennessee.
Can your tax returns be audited in Tennessee?
Yes, the Tennessee Department of Revenue can audit any tax returns to verify that correct taxes have been paid.
Are nonprofit organizations subject to payroll taxes in Tennessee?
Yes. While 501(c)3 organizations have exemptions, a nonprofit organization in Tennessee is liable to pay unemployment taxes if it has had four or more employees for 20 weeks in the current or preceding calendar year.
Do employers need workers’ compensation in Tennessee?
Tennessee employers do not need workers’ compensation unless they work in construction or have more than five employees.
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.
