Arizona payroll taxes and calculator for employers (2026)

What makes Arizona payroll unusual

Most income tax states give you a withholding table. Arizona gives the choice to the worker. On Form A-4 the employee elects a flat percentage of gross pay, from 0.5% to 3.5% in half-point steps. If a new hire never turns in an A-4, you withhold 2.0%. That default and the step list come from Bloomberg Tax, a secondary source, because the Arizona Department of Revenue form page did not load when we checked. Collect the A-4 at hire so your payroll system is not guessing.

The rest of the Arizona picture is light by comparison:

• Small wage base. SUTA stops at $8,000 per employee, so even the 8.36% top rate costs at most $668.80 per worker a year.
• No payroll-funded leave program. There is no state disability or paid family leave deduction to run.
• No local income taxes. Arizona cities and counties do not withhold a wage tax.
• Two paydays a month. You must pay at least twice a month, no more than 16 days apart.
• Fast final pay for firings. A discharged worker is owed wages within 7 working days or by the end of the next regular pay period, whichever comes first (A.R.S. 23-353).
• PEO rules changed in 2024. HB 2252 repealed PEO registration with the Secretary of State. The bonding or $100,000 net worth rule in A.R.S. 23-569 still applies.

Arizona employer payroll facts at a glance

Registering as an Arizona employer

Plan on two state accounts, plus new hire reporting and insurance.

1. Get a federal EIN from the IRS.
2. Register for withholding with the Arizona Department of Revenue (azdor.gov).
3. Apply for an unemployment insurance tax account number with DES. Its page "Applying for an Unemployment Insurance Tax Account Number" is linked in the sources below.
4. Report each new or rehired employee through DES new hire reporting within 20 days of the hire date.
5. Buy workers comp coverage before the first day of work. Arizona requires it for any employer that regularly employs workers in its usual business, whatever the headcount, and part-time workers count, according to an Industrial Commission FAQ dated November 2015 (an older document, so confirm with the ICA).

If you are hiring your first person, our first employee checklist covers the federal side (EIN, Form I-9 and Form W-4).

What one Arizona employee costs you in taxes

Take a $50,000 salary at a new Arizona business. Arizona's part of the bill is small because the state taxes only the first $8,000.

That is $4,027, or 8.05% on top of salary. Arizona adds only $160 of it. After your first rating period DES moves you to an experience rate between 0.03% and 8.36%, so a company with steady staff and few claims can drop to $2.40 per head. Workers comp premiums sit on top and depend on your class codes; see what workers comp costs per $100 of payroll.

Payroll providers and PEOs for Arizona businesses

A full-service payroll product should file Arizona withholding and DES reports for you. The things worth checking are whether it stores each employee's A-4 percentage instead of applying one default, and whether it charges to register your state accounts (Gusto lists state tax registration as "varies by state" on its pricing page, checked October 16, 2026; its Simple plan is $49 a month plus $6 per person).

Compare full-service options in our payroll software rankings. If you want benefits and workers comp bundled, read PEOs operating in Arizona and the PEO rankings. Arizona's lighter PEO rules mean you should ask any PEO for proof of its bond or net worth.