At the end of November or beginning of December, state agencies send their tax rate notices to employers. The notice tells you how much your Unemployment Insurance, State Disability Insurance rates, etc., will be for the following year. Make sure you have these tax rates updated in Gusto.
Why should I do this?
When you have employees (such as yourself), you must pay federal and state unemployment taxes. These taxes fund unemployment programs and pay benefits in the event employees lose their jobs.
As an employer, it's your responsibility to ensure you update your state tax rates on your payroll software every year. Gusto will then withhold the correct amount of payroll taxes. An underpayment of taxes would result in penalties.
What does the form look like?
Here is an example notice in California:
And here's one from Texas:
How should I update my contribution rates?
Go to Gusto
Click on Taxes & compliance on the left side navigation
Click on Tax setup
If the tax rates in gusto and on the Tax rate notice are the same, that means your tax rate has not changed, therefore no changes are required.
If the tax rates are different than what's in your Gusto account, click on Manage Taxes to update the tax rate.
Click on the Edit pencil
From the options, select "Add a new rate"
Enter the effective date as per the notice (usually, it's the start of next year). Also, enter the new UI Rate and hit Save.
Here is an example for California:
Why did the rates not change?
There are two reasons why your rates did not change. Either the states did not change the rate for that year or Gusto has already updated the new rates in their system.
What if the rates shown on the notice do not appear in Gusto?
If you're unable to add/update a new rate or have any other questions, please send us an email at [email protected]
Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining accounting or other financial advice from an appropriate financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.