How to Pay Unemployment Insurance for Employees in Arkansas

Everything employers need to know about paying unemployment insurance taxes in Arkansas.

If your small business has employees working in Arkansas, you’ll need to pay Arkansas unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In Arkansas, state UI tax is just one of several taxes that employers must pay. Other important employer taxes, not covered here, include federal UI tax, and state and federal  withholding taxes.

Different states have different rules and rates for UI taxes. Here are the basic rules for Arkansas’s UI tax.

Register With the Department of Workforce Services

As an Arkansas employer subject to UI tax, your small business must establish an Arkansas UI tax account with the Arkansas  Department of Workforce Services  (DWS). You must register with DWS no later than the last day of the second month in which your business first has an employee. When you register with DWS, they will make a determination of whether your business is liable for UI taxes. (Most businesses with employees will be liable.)

You can register for an account with DWS either online or on paper. Once registered, you’ll be issued a DWS account number. To register online, use the Arkansas DWS  Online Unemployment Insurance Employer Serviceswebsite. To register on paper, use DWS-ARK-201,  Report To Determine Liability Under The Department of Workforce Services Law. Blank forms are available for download from the  UI Employer Forms  section of the DWS website. There is no fee to register your business with DWS.

Note:  To establish your Arkansas UI tax account and obtain your DWS account number, you’ll need a federalemployer  identification  number  (EIN). You can apply for an EIN at  irs.gov. Generally, if you apply online, you will receive your EIN immediately.

Rules for UI Tax Liability

As an Arkansas for-profit employer, you generally are liable for state UI taxes as soon as you meet either of the following conditions:

  • you employ one or more workers for some portion of ten or more days during a calendar year, or
  • you acquire the business or part of the business of an employer subject to unemployment taxes.

These rules are similar to, but different from, the rules for liability for federal UI taxes under the Federal Unemployment Tax Act (FUTA). Moreover, different rules, not covered here, apply to agricultural (farm) workers, domestic (in-home) workers, and employees of some (but not all) non-profit organizations.

One piece of good news is that state UI tax payments generally can be credited against your FUTA taxes.

Wage Base and Tax Rates

UI tax is paid on each employee’s wages up to a maximum annual amount. In recent years that amount, known as the taxable wage base, has been stable at $12,000 in Arkansas. However, it’s always possible the amount could change.

The UI tax rate in Arkansas is comprised of a base rate plus potential additional taxes. The additional taxes include an advanced interest tax, an extended benefit tax, and a stabilization tax. Whether these additional taxes are assessed depends on things like the balance of the state’s UI trust fund, the amount of the state’s taxable payrolls, and whether the state owes interest on money borrowed from the federal government. The stabilization tax, for example, which can range from 0.1% to 0.8%, has been assessed in recent years.

Like the taxable wage base, the state UI tax rate for new employers can change from one year to the next. However, in recent years, the base rate for new employers (before any potential additional taxes) has been 2.9%. New employers generally have the new employer rate for their first three years. Established employers are subject to a lower or higher rate than new employers depending on an “experience rating.” This means, among other things, whether your business has ever had any employees who made claims for state unemployment benefits.

File Quarterly UI Tax Reports and Payments

In Arkansas, UI tax reports and payments are due by the last day of the month following the end of each calendar quarter. In other words:

For Wages Paid During

Calendar Quarter Ends

Report Due By

Jan, Feb, Mar

March 31

April 30

Apr, May, Jun

June 30

July 31

Jul, Aug, Sep

September 30

October 31

Oct, Nov. Dec

December 31

January 31

You can file your reports and payments online or on paper. To file online, use DWS’s  Online Unemployment Insurance Employer Services  website. Online payments are available using Electronic Funds Transfer (EFT). To file on paper, use Form DWS-ARK-209B,  Employer’s Quarterly Contribution and Wage Report. You can download blank forms from the  UI Employer Forms  section of the DWS website. You also have the option to file using magnetic media (CD or DVD).

You must file wage reports on a quarterly basis whether or not wages have been paid in the quarter. You will be subject to a penalty if you fail to file.

Post a Notice (Poster)

You are required to post a notice (poster) regarding state unemployment claims in a conspicuous place for all employees. The poster provides basic information on when and how to file a claim for unemployment benefits. You can download a notice that meets all legal requirements (Form DWS-ARK-237,  Employer Workplace Poster) from the  UI Employer Forms  section of the DWS website.

Do Not Misclassify Employees as Independent Contractors

Employers who use independent contractors rather than hiring employees are not subject to the UI tax. However, it’s important that you do not misclassify an  employee  as an independent contractor. If you do misclassify an employee, you could be subject to penalties or fines.

Using Payroll Service Companies

You may decide that it’s easiest to hand over responsibility for payroll, including UI taxes, to an outside payroll service. If so, keep in mind that your business, or even you personally, may still be held directly responsible for mistakes made by an outside payroll company.

Additional Information

This article touches on only the most basic elements of Arkansas UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and DWS websites for the latest information. DWS also has a helpful  UI Employer  Handbook  that you can download from the DWS website. In addition to state UI tax, employers have other responsibilities not covered in this article such as federal UI tax, state and federal withholding taxes, required reporting of new hires, required retention of employee records. You can get more information about other  small  business  tax issues  in other articles here on Nolo.com.

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