Texas employer payroll taxes and registration in 2026
Texas has no state personal income tax, so a Texas employer does not withhold state income tax from wages, but it owes Texas unemployment tax once it becomes liable under the Texas Unemployment Compensation Act (TUCA) and must register with the Texas Workforce Commission (TWC) within ten days of becoming liable. For 2026 the taxable wage base is $9,000 per employee per calendar year and the entry-level rate for a new employer is 2.70 percent, as of November 2026.
Does Texas have state income tax withholding?
Texas has no state personal income tax, so a Texas employer does not withhold state income tax from wages, while federal income tax withholding, Social Security, Medicare and federal unemployment tax still apply. The Texas Constitution, Article VIII, Section 24-a, says the legislature may not impose a tax on the net incomes of individuals, and the Texas Comptroller of Public Accounts states that Texas has no state income tax. Texas has no state income tax to register for, but a liable employer still registers with TWC for unemployment tax, which the employer pays.
When does my business become liable for Texas unemployment tax?
A Texas employer becomes liable for unemployment tax when it meets any one TUCA test, such as paying $1,500 or more in gross wages in a calendar quarter or having at least one employee in 20 different weeks in a calendar year, and it must register with TWC within ten days of becoming liable. For an ordinary business employer, TWC lists four criteria and says an employer needs to meet only one.
Criterion
What TWC lists
Federal liability
The business is liable under the Federal Unemployment Tax Act (FUTA) and has paid wages to Texas employees
Wages or weeks
The business pays $1,500 or more in total gross wages in a calendar quarter, or has at least one employee during 20 different weeks in a calendar year regardless of wages
Acquisition
The business acquires or otherwise receives, through any means, all or part of the organization, trade, business or workforce of a liable employer
Volunteering
The business volunteers to become liable although it does not meet the criteria
For the weeks test, the employee need not be the same person, the weeks need not be consecutive, and full-time or part-time status does not matter. Texas Labor Code section 201.021 states both the $1,500 test and the 20-week test as applying to the current or preceding calendar year. TWC lists separate tests for 501(c)(3) nonprofits, domestic services, farm and ranch labor and political subdivisions.
Do independent contractors or workers paid through a PEO make me liable for Texas unemployment tax?
Under TWC’s Texas rules, an employer is not liable for unemployment tax on payments to independent contractors and a client whose employees are paid through a licensed Professional Employer Organization (PEO) is not liable to report their wages, but each rule has a condition. For contractors, TWC says it is not enough for the employer and the worker to agree on contractor status. For a licensed PEO, the PEO reports and pays under its own account numbers. If the PEO is not properly licensed, which requires a Staff Leasing license from the Texas Department of Licensing and Regulation, the client must report the employees and pay the taxes under its own account at its own assigned rate. TWC also says that an agreement under which one corporation consolidates the payroll of a group of corporations does not qualify the group for common paymaster status and is “payrolling,” which is not allowed in Texas, and that related corporations may use a common paymaster only if TWC pre-approves it. These are Texas rules for Texas unemployment tax only.
How do I register as an employer in Texas?
A Texas employer registers online through Unemployment Tax Registration (UTR), which TWC calls free and which takes about 20 minutes, unless TWC lists the employer among those that cannot use UTR. TWC’s online registration tool says a business that has not yet paid wages to people working in Texas must wait until it pays wages to register. TWC says an employer that pays wages must register within ten days of becoming liable under TUCA. An employer that is liable immediately receives a TWC tax account number, and TWC mails an Employer Liability Notice that takes about two weeks. An employer that does not file reports or pay taxes when it finishes registering must wait for that notice to access its account in Unemployment Tax Services (UTS), where wage reports are filed and taxes are paid.
TWC’s UTR information page lists what registration asks for, and all of it is required.
* Provide a business contact email and the US mailing address.
* Enter payroll information, including when the business first hired an employee, when it first paid wages, and total quarterly wages for all locations.
* Name the previous owner and give that owner’s address if the business was acquired.
* Supply the Social Security numbers and residence addresses of the owners, partners or officers.
* List the trade name and physical address of each Texas business location and the principal activities or products of the business.
The Employment Type and Business Type chosen in UTR cannot be changed, so a change means a new registration. 501(c)(3) nonprofits, state agencies, political subdivisions, employers exempt from TUCA, employers liable under two or more TUCA categories, employers paying wages to US citizens for services outside the United States and employers with a mailing address outside the United States cannot use UTR and register with TWC tax staff instead.
What is the SUTA rate for Texas?
For 2026 the Texas unemployment taxable wage base is $9,000 per employee per calendar year, and the Texas Workforce Commission sets the entry-level rate for a new employer at 2.70 percent for all groups with no exceptions. Texas state unemployment tax (SUTA), which TWC calls unemployment tax, equals the employer’s tax rate times taxable wages. A newly liable employer begins with either a predetermined rate or, if it acquired compensation experience from a previously liable employer, a computed rate. As TWC states the statute, TWC calculates an average rate for each industry group (NAICS), and the entry-level rate for each group is the higher of that average or 2.70 percent.
For 2026 TWC’s published range for experience-rated employers is 0.32 percent to 6.32 percent. Wage bases and rates vary by state, and the Texas figures here are as of November 2026.
What is the Texas unemployment tax taxable wage base?
The Texas unemployment taxable wage base is the first $9,000 that an employer pays each employee in a calendar year, because Texas Labor Code section 201.082 excludes pay above $9,000 from wages. TWC says the maximum taxable wages per employee per calendar year is set by statute and is currently $9,000, as of November 2026, and its ten-year table shows $9,000 for every year from 2017 to 2026.
How long does the Texas new employer rate last?
Newly liable Texas employers keep their predetermined rate until four chargeable quarters, after which TWC assigns an interim rate for the rest of that calendar year and then an experience tax rate. A chargeable quarter is one in which the employer may be responsible for unemployment benefits paid to a former employee, and no claim need be filed. TWC says that in most cases an employer is not chargeable until its third quarter of paying wages, and that employers must pay wages for a minimum of six quarters to receive an experience rating.
What does a Texas hire cost in state unemployment tax?
A Texas employer’s state unemployment tax for 2026 is the tax rate times the first $9,000 paid to each employee, which comes to $243.00 per employee at the 2.70 percent entry-level rate when the employee is paid at least $9,000 in the year.
Arithmetic from TWC’s 2026 figures, as of November 2026, for an employee paid at least $9,000 in the calendar year.
Rate
Calculation
Texas unemployment tax per employee
2.70 percent entry-level rate
2.70 percent x $9,000
$243.00
0.32 percent, TWC’s 2026 minimum
0.32 percent x $9,000
$28.80
6.32 percent, TWC’s 2026 maximum
6.32 percent x $9,000
$568.80
FUTA is a separate federal tax. For 2026 the FUTA tax rate is 6.0 percent on the first $7,000 paid to each employee; an employer that pays state unemployment tax in full, on time and on the same wages can take a credit of up to 5.4 percent, which leaves 0.6 percent; the state wage base may be different. Which states are FUTA credit reduction states for 2026 is not final until after November 10, 2026, when the Department of Labor announces them, so check Schedule A (Form 940) and DOL’s FUTA credit reductions page after that date.
How does Texas set my unemployment tax rate after the new employer period?
Once an employer is experience-rated, its Texas unemployment tax rate is the sum of five components, which TWC names as the General Tax Rate, the Replenishment Tax Rate, the Obligation Assessment Rate, the Deficit Tax Rate and the Employment and Training Investment Assessment. TWC calculates rates as of October 1 for the following calendar year.
An employer’s rate experience transfers to a successor when the successor acquires all or part of the organization, trade, business or workforce of another employer, continues the operation, and certain relationships exist. TWC says there is no provision in the law for voluntary total transfer of experience. A partial transfer needs a TWC-approved application, signed by both parties and postmarked within two years of acquisition for common-ownership transfers or one year for non-common ownership. TWC states that it is unlawful to avoid a higher rate by altering the experience rating through transferring operations to a successor.
How can I lower my Texas unemployment tax rate?
TWC says an employer may be able to lower its unemployment tax rate by keeping its account addresses current, paying all outstanding taxes by October 31, responding quickly to employer notices about benefit claims, making voluntary contributions before the deadline (not available at a predetermined rate) and reporting new hires and benefit fraud immediately.
TWC explains that taxable wages reported offset chargebacks only if the corresponding taxes have been paid. A private employer may voluntarily pay all or part of the benefits charged to its account rather than receive an increased rate. Predetermined rates are not eligible for a voluntary contribution.
When are Texas quarterly wage reports and unemployment tax payments due?
Texas quarterly wage reports and unemployment tax payments are due by the last day of the month after the quarter ends, which is April 30, July 31, October 31 and January 31, and TWC rules require employers to file and pay electronically. As of November 2026, TWC’s due dates page lists these dates.
Wages paid
Due
File and pay by
January to March
April 1
April 30
April to June
July 1
July 31
July to September
October 1
October 31
October to December
January 1
January 31
If a due date falls on a Saturday, Sunday or a legal holiday on which TWC offices are closed, reports and payments are timely if they are received on or before the following business day. January 31, 2027 is a Sunday, so the fourth-quarter 2026 report and payment are timely through Monday, February 1, 2027.
Do I have to file and pay Texas unemployment tax online?
A Texas employer must report wages and pay unemployment tax electronically, because TWC Rules 815.107 and 815.109 require all employers to do so, unless TWC has approved an electronic hardship waiver. TWC’s filing options page says employers that do not may face penalties under Texas Labor Code sections 213.023 and 213.024. TWC grants hardship waivers to employers that have no computer or no Internet access, and only employers with an approved waiver may file or pay by mail.
TWC offers two free filing methods.
* Use Unemployment Tax Services (UTS), for employers with 1,000 or fewer employees, to upload a file, copy the last report, enter wages manually or file a No Wages report.
* Use QuickFile, which accepts any number of employees and serves agents and payroll providers.
The quarterly report is the Employer’s Quarterly Report (Form C-3).
What happens if I file or pay Texas unemployment tax late?
A Texas employer that pays unemployment tax late owes interest, and one that files a wage report late owes a penalty that grows by month. TWC states that interest on late tax is 1.5 percent of the tax for each month or part of a month after the final due date, up to 37.5 percent.
As of November 2026, TWC’s computation worksheet states the late wage report penalty this way.
Report filed
Penalty
During the first 15 days after the final due date
$15.00
After 15 days but no later than the last day of the month after the final due date
Taxable wages x 0.05 percent + $30.00
During the second month after the final due date
Taxable wages x 0.15 percent + $60.00
During or after the third month
Taxable wages x 0.35 percent + $90.00
The worksheet is not meant for reports with extended due dates or quarters older than five years. TWC allows a request to waive, or abate, penalty and interest on late reports and payments. The employer pays all outstanding tax, then submits a Contact Request in UTS with the issue “Penalty Abatement,” stating why the reports were late and the quarters involved. TWC reviews within 30 days and gives notice only if the request is denied.
Do I have to report new hires in Texas?
A Texas employer must report each new or rehired employee within 20 calendar days from the date the employee starts earning wages. The Texas Attorney General, which administers new hire reporting, gives the rule of thumb that an employee who must complete a W-4 must be reported. Quarterly wage reporting is not the same as new hire reporting. The Attorney General advises a multi-state employer to choose Texas as its reporting state, which it says is the only way TWC receives new hire information on Texas residents who may be receiving unemployment benefits and working for a multi-state employer. TWC says to report new hires at the Employer New Hire Reporting Operations Center, which the Texas Office of the Attorney General administers.
What does the Texas Payday Law require employers to do?
The Texas Payday Law, Chapter 61 of the Texas Labor Code, requires employers to pay their employees in full, on time and on scheduled paydays, and TWC administers it. These are the employer duties Chapter 61 states.
* Pay employees exempt from the federal overtime provisions of the Fair Labor Standards Act (FLSA) at least once a month, and pay all other employees at least twice a month, with each twice-a-month pay period having as nearly as possible an equal number of days.
* Designate paydays and post notices of them in conspicuous places. If the employer does not designate paydays, they are the first and 15th of each month.
* Pay a discharged employee in full not later than the sixth day after the discharge date, and pay an employee who leaves other than by discharge not later than the next regularly scheduled payday.
* Pay wages in US currency, by a written instrument negotiable on demand at full face value, or by electronic transfer to an employee-designated account or an employer-established payroll card account, unless the employee agrees in writing to receive part or all of the wages in kind or in another form.
* Give each affected employee written notice at least 60 days before a direct deposit system begins, and, for a payroll card account, written notice, a list of all fees and a form for requesting an alternate form of payment at least 60 days before the first payroll card deposit or, for an employee hired after the employer adopts the plan, by the employee’s first day of work.
* Deduct from wages only when a court orders it, state or federal law authorizes it, or the employee has given written authorization to deduct for a lawful purpose.
For bad-faith nonpayment, TWC may assess an administrative penalty that may not exceed the lesser of the wages in question or $1,000, as of November 2026. Under Texas Labor Code section 61.019, an employer commits a third-degree felony if it intends at the time of hiring to avoid paying wages owed and fails to pay after demand, or if it intends to avoid paying wages owed and to continue employing the employee and fails to pay after demand. A wage claim must be filed within 180 days of the original pay date, and TWC gives the employer 14 days to respond to a claim.
Does my Texas business have to carry workers’ compensation insurance?
In Texas, private employers can choose to carry workers’ compensation insurance, but it is not required in most cases, and an employer without coverage must give employees and the Division of Workers’ Compensation the notices the Texas Department of Insurance (TDI) describes. The TDI employer page and Texas Labor Code section 406.002 state this rule, under which, apart from public employers and as otherwise provided by law, an employer may elect to obtain coverage. Public employers are an exception, and a governmental entity that enters a building or construction contract must require the contractor to certify in writing that it carries coverage for each employee on the public project. Employers without coverage are called non-subscribers.
Section 406.005 requires every employer to notify each employee whether or not it has coverage. The employer notifies a new employee at hire, posts a notice at conspicuous locations in the place of business and revises it when the information changes, and notifies each employee within 15 days after coverage is obtained, terminated or canceled.
A non-subscriber has further duties, which TDI’s non-subscriber page describes as of November 2026.
* File a notice of no coverage with the Division of Workers’ Compensation between February 1 and April 30 each calendar year, after hiring the first employee, and after terminating a Texas workers’ compensation policy.
* Post the notice of no coverage in English, Spanish and any other language as needed, and give written notice of no coverage to new employees.
* Report work-related injuries, illnesses and deaths with more than one day of lost time if the non-subscriber has five or more employees, within one month and seven days from the date of death, knowledge of the work-related illness, or after lost time began.
Under sections 406.004 and 406.005, an employer that fails to give the required notice to the Division of Workers’ Compensation or the required notices to employees commits an administrative violation.
What records must a Texas employer keep, and what changes must it report to TWC?
A liable Texas employer must keep employment and payroll records for four years under TWC Rule 815.106, as TWC lists among a liable employer’s duties. The records cover the employer’s name and address and each branch. For each worker they cover names, addresses and Social Security numbers, dates and states worked, wages by payroll period and date paid, and other remuneration.
An employer must tell the TWC Tax Department when employment is discontinued, when ownership, name or tax mailing address changes, and when the account number, federal ID number or phone number is wrong on preprinted forms. An employer must also display the workplace posters TWC lists for workers entitled to file for state unemployment benefits. An employer may authorize an agent or service company to act for it, but TWC says hiring an agent does not relinquish the employer’s own responsibilities for its Texas unemployment tax account.
Talk to an expert at Asure
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