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The Arizona 2021 state unemployment insurance (SUI) tax rates range from 0.08% to 20.6%, significantly up from 0.05% to 12.85% for 2020. The 2021 new employer rate continues at 2.0%.

2021 taxable wage base

The SUI taxable wage base continues at $7,000 for 2021.

Employers affected by COVID-19 were given extension to file first quarter 2020 returns

The Arizona Department of Employment Security extended to June 1, 2020 the deadline for contributory employers to file their first-quarter 2020 SUI tax returns and pay the corresponding taxes. (Arizona DES unemployment insurance newsletter forfirst-quarter 2020; EY Tax Alert 2020-0998, 4-16-2020.)

According to the newsletter, there was no action required by employers to be eligible for the extension. Reports and payments received by the extended due date did not result in delinquent notices from the Department's Collections Department.

Employers should review their 2021 SUI tax rate notices to be sure that they are receiving credit for the contributions paid after the April 30, 2020 first-quarter deadline.

Employer accounts not charged with COVID-19 UI benefit charges

Governor Douglas Ducey's Executive Order 2020-11 and SB 1694/Chapter 48 provide that retroactive to March 10, 2020, employers are not charged for unemployment insurance (UI) benefits attributive to COVID-19. In adjusting employer SUI tax rates, the Department was ordered to not charge COVID-19 UI benefits against an employer's account. (EY Tax Alert 2020-1140, 4-28-2020.)

Employers should review the UI benefit charges for fiscal year 2020 reflected on their SUI rate notices and their UI benefit charge statements to confirm that COVID-19 UI benefits were not charged to their accounts.

Except under certain conditions, workers cannot continue to collect UI benefits if they refused to return to work when recalled by their employers. Go here for information.

Governor to transfer CARES Act funding to UI trust fund

Reportedly, the governor plans to transfer CARES Act funds to the state's UI trust fund to avoid borrowing from the federal governor to pay UI benefits. (Arizona Capitol Times, 11-1-2020; telephone conversation, Department representative.)

According to the federal Treasury Directwebsite, as of February 4, 2021, Arizona has not requested federal unemployment insurance (UI) Title XII advances (UI loans).

Mailing of 2021 rate notice

The Arizona Department of Economic Security mailed the 2021 SUI tax rate notices to employers on December 30, 2020. (Telephone conversation, Department representative.)

Employers may also obtain copies of their current and past SUI tax rate notices online through theArizona Tax and Wage System(TWS) by logging in and selecting "Rate/Benefit Charge Notices" from the menu.

Two options to potentially reduce 2021 tax rates

Experience-rated employers may reduce their 2021 SUI tax rates if they act by March 1, 2021 (February 28, 2021 falls on a Sunday). Following are the two voluntary elections that can potentially lower an employer's SUI tax rate:

• Voluntary contributions. Experience-rated employers may make a voluntary contribution to reduce their assigned 2021 SUI tax rate. The voluntary payment increases the amount of the employer's reserve account and thereby may reduce the employer's state unemployment tax rate.
• Joint accounts. Joint accounts may only be formed in Arizona if the employing entities are commonly owned. By forming a joint account, the unemployment experience of two or more Arizona employers are combined to obtain a single SUI tax rate. The members of a joint account with favorable employment history can share their unemployment insurance reserves with other members of the joint account, effectuating an overall reduction in state unemployment taxes. In a large corporate organization, not all members need to be included in the joint account election. Instead, entities may be included in the common rate group based on the overall desired SUI tax rate results. Newly formed joint accounts must participate in the joint account for a minimum of two years.

The joint account election offers an above-the-line tax benefit that does not require a change in the corporate structure.Each entity continues to file separate SUI returns after the joint account is established.

Joint accounts and voluntary contributions may mitigate some of the anticipated tax increases due to the current economic conditions. Employers may combine a joint account election and voluntary contribution for an increased overall benefit.

To achieve the benefit of a voluntary contribution, the payment must be mailed (postmarked) to the Department by March 1, 2021. To achieve the benefit of a joint account election, an application must be mailed (postmarked) by March 1, 2021, to be applicable for the 2021 tax year.

Not all voluntary contributions and joint accounts are advantageous — a careful analysis of a company's specific unemployment facts is vital in determining whether to pursue the joint account election and/or a voluntary contribution.

For more information on Arizona SUI tax rates, see the Department's website.

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