In this article, we explain how State Unemployment Insurance (SUI) and State Withholding Tax Accounts (SIT) function in a co-employment relationship with Deel Professional Employer Organisation (PEO) and how we support employers in efficiently managing SUI and State Withholding Tax accounts.

What is State Unemployment Insurance (SUI)?

State Unemployment Insurance (SUI) is a state insurance program designed to provide short-term benefits to workers who are unemployed through no fault of their own. Financed by employers through payroll taxes, these benefits help individuals while they search for new employment.

Who Qualifies For Unemployment Benefits?

Workers who lose their jobs through circumstances beyond their control, as determined by state law, are typically eligible for unemployment benefits. This includes individuals who have been laid off or have had their positions eliminated. 

This means anyone who quits their job or is fired for misconduct is not eligible for these benefits. However, other workers can be eligible if they meet the state-determined eligibility requirements. For example, someone who has been laid off or depending on the state, a worker who quits due to health reasons, may be eligible for SUI benefits.

Who Pays For SUI?

Employers are responsible for funding state unemployment insurance tax for their employees. 

The SUI amount and the length of time benefits are available are determined by the State law under which unemployment insurance claims are established.

In the majority of States, SUI is exclusively funded by employers. (Three (3) States -  Alaska, New Jersey, and Pennsylvania require minimal employee contributions.)

For the insurance tax payment, the employer must register for an SUI account number and must pay state unemployment insurance taxes in any state where their employee works. 

PEO-Reporting and Client-Reporting States

In a co-employment relationship with Deel PEO, states are classified into two primary categories to ensure compliance and streamline SUI operations: PEO-Reporting and Client-Reporting.

[ACCORDION]PEO-Reporting States

• Deel acts as the Employer of Record for SUI tax in PEO-Reporting states.
• We will manage the filing process under our Employer Identification Number (EIN) and SUI account number.

If your team already has an active SUI account in a PEO-reporting state, it should be closed to prevent potential fines and notices.

Deel PEO-Reporting States: 

Alabama, Arizona, Colorado, DC, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maryland, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Texas, Utah, Virgin Islands (US), Virginia, West Virginia, Wisconsin.

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[ACCORDION]Client-Reporting States

In client-reporting states, employers are mandated to file SUI tax using an unemployment account linked directly to their Employer Identification Number (EIN).

• If the client already has their own account in one of the states listed below, we will require third-party access (TPA) to the client's account to collect information such as the account number and current rate to file the tax on their behalf. 

Please note that if your team joins mid-quarter, we may wait until after your previous provider files to request TPA. 

• If the client does not have their own account but has employees working in one of the states below, Deel will register an account in the applicable state on the client's behalf.

Please note that any other corporate tax filings or business registrations will have to be handled by your company directly, outside of Deel. 

Deel Client-Reporting States: 

Alaska, California, Connecticut, Delaware, Iowa, Kentucky, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, North Dakota, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Vermont Washington, and  Wyoming.

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Frequently Asked Questions

[ACCORDION]Do I need to open a State Withholding Account (SIT) for every new state I hire in?

In a PEO partnership with Deel, we handle all filing responsibilities for the client's company across all states. This means that if the client hires an employee in a new state, they do not need to initiate any new State Withholding Account (SIT).

If the client were using a different payroll provider before transitioning to Deel, they probably have existing withholding accounts that should be closed. However, it's important not to close these accounts until the previous provider has completed the necessary filings for the last quarter you were under their services.

During the period the client was with their previous provider, they are accountable for fulfilling all quarterly and annual filings and reconciliations.

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