Arizona payroll setup for your first hire

One Joint Tax Application can start two accounts. The later portals are not the same.

Arizona takes state income tax from paychecks. ADOR collects that withholding. DES collects state unemployment tax. That tax is often called SUTA, state unemployment tax, or SUI, state unemployment insurance. You can start those two accounts on one file. You still file them on two systems.

ADOR’s filing-obligations page starts that file on AZTaxes.gov. The start file is the Arizona Joint Tax Application (Form JT-1). DES also calls that paper Form UC-001. Completing JT-1 begins unemployment registration with DES. DES’s account-number page says ADOR forwards a copy to DES. The two agencies process the file separately. Each agency notifies you separately. An AZTaxes login is not a DES unemployment account number. A payroll login is not either account.

This is not New Jersey’s NJ-REG. New Jersey also uses one start file. Arizona’s later IDs are not the same. After ADOR registration, the withholding ID is the federal EIN. That EIN-as-withholding-ID rule is Arizona-specific. Do not copy New Jersey’s Taxpayer Identification Number onto Arizona.

When you owe unemployment: $1,500 in a quarter, or one person in 20 weeks

A.R.S. § 23-613 is the regular-shop test after December 31, 1971. You are an employer if you pay wages of $1,500 or more in any calendar quarter in the current or preceding calendar year. You are also an employer if you have at least one person in employment for some portion of a day in each of twenty different calendar weeks in the current or preceding calendar year. One of those two tests is enough. DES’s who-pays page restates both tests. The weeks do not have to be consecutive. The people do not have to be the same.

This is not California’s $100-in-a-quarter test. It is not Washington’s no-withholding path. Arizona withholds state income tax from paychecks. Do not copy California onto Arizona. Do not copy Washington’s missing withholding account onto Arizona either. The start file can be shared. The later portals are not.

Other tests sit on that DES page and in the same statute. Household work uses $1,000 in a quarter. Agricultural labor uses $20,000 in a quarter, or ten people in 20 weeks. A 501(c)(3) shop uses four people in 20 weeks. A successor who takes over a shop that already pays unemployment tax is an employer. A shop that must pay Federal Unemployment Tax is an employer. This scorecard is the regular-business path.

DES mails an 8-digit unemployment number. File quarterly reports on the Tax and Wage System.

DES decides liability from the facts you send. DES’s account-number page says you register on the Joint Tax Application as soon as you begin business in Arizona. The file needs a federal EIN. There is no 15-day California clock on that page. File when the facts show you are an employer.

If DES finds you liable, it mails a Determination of Unemployment Insurance Liability (Form UC-016 or Form UC-015A). That letter prints the legal basis, the date coverage starts, the tax rate, and an 8-digit Arizona UI employer account number. Hold that number. Use it on reports and payments. Do not substitute a federal EIN for that DES number. If the letter does not arrive, DES’s Tax and Wage System page tells you to ask the Employer Registration Unit.

DES’s who-pays page sets the taxable wage base at the first $8,000 of each employee’s wages in a calendar year. Taxes are due only on wages up to that base. Before January 1, 2023, the amount was $7,000. DES’s calculating-taxes page assigns a new employer, other than a successor, a 2.0 percent rate for a minimum of two calendar years. After that, DES uses a reserve-ratio experience rate. Each year DES mails a Determination of Unemployment Tax Rate (Form UC-603). Use the rate on that notice, not a number from a software page.

After DES issues the account, file the quarterly unemployment wage report in the Tax and Wage System. That portal is the DES unemployment filing site. Patriot’s tax table calls that quarterly report Form UC-018. Confirm the live due date on DES and on the Determination. A quarterly wage report is not the new-hire report.

Register withholding on AZTaxes. Collect the Arizona Withholding Percentage Election within five days, or withhold at 2.0 percent.

Arizona withholds state income tax from paychecks. ADOR’s withholding page says every employer who pays for services performed in Arizona must withhold. Register the federal EIN on AZTaxes.gov with Form JT-1. The filing-obligations page says that after ADOR registration, the business’s withholding ID with ADOR is the company’s EIN. There is no separate Arizona withholding number.

Within five days of hire, collect the Arizona Withholding Percentage Election (Form A-4). If the new employee does not complete Form A-4 in those five days, withhold Arizona income tax at 2.0 percent until the employee elects a different rate. Employees pick a percentage of gross taxable wages: 0.5 percent, 1.0 percent, 1.5 percent, 2.0 percent, 2.5 percent, 3.0 percent, or 3.5 percent. A worker who expects no Arizona income-tax liability may elect zero on Form A-4. That zero election must be renewed each year. A federal W-4 is not the Arizona election.

File withholding returns on the schedule ADOR assigns from the prior four-quarter withholding average. Annual filers, whose average is less than $200 and who meet the other ADOR tests, file the Arizona Annual Payment Withholding Tax Return (Form A1-APR) by January 31. Other shops file the Quarterly Withholding Tax Return (Form A1-QRT) and the Withholding Reconciliation Tax Return (Form A1-R). A1-QRT is due April 30, July 31, October 31, and January 31. File A1-QRT even if no tax is due that quarter. A1-R is due January 31. Shops whose prior four-quarter average is more than $1,500 deposit on the same clock as federal withholding. Employers who owe $500 or more for a year after 2020 must pay by electronic funds transfer. Later filing sits on AZTaxes.gov.

New hire is a 20-day report. A quarterly unemployment report does not satisfy it.

The new-hire report is a list of who you just hired. It is not a box on the DES Tax and Wage System wage report. A.R.S. § 23-722.01 requires the report within twenty days after the employee is hired, rehired, or returns to work. A rehired person is someone who was gone for at least 60 consecutive days. Report name, address, Social Security number, and the date the person first performed services for pay, plus the shop’s name, address, and federal EIN.

File with the Arizona New Hire Reporting Center. That directory sits with DES child-support work. It does not sit with the DES unemployment portal. The center’s instructions restate the 20-day clock. Report people who reside or work in Arizona and who you expect to pay, even if they work one day. Employers who send reports electronically send two monthly files, not more than 16 days apart, when they have people to report. A quarterly UC-018 or Tax and Wage System wage report does not satisfy that clock.

Workplace injury insurance is a private policy when you regularly hire

This is a first-hire policy for ordinary shops. It is not Washington’s state-fund monopoly. It is not Florida’s four-employee wait. It is not Ohio’s Bureau of Workers’ Compensation fund. Arizona calls this workers’ compensation.

ICA’s employer FAQ is the agency rule. If you regularly hire workers in the customary business, you must carry coverage. One worker is enough. Part-time people count. Family members count. Minors count. A.R.S. § 23-902 is that regular-hire test. Casual work that is not in the usual business is left out. Domestic work in a private home is left out. Independent contractors are left out.

ICA does not sell insurance. Arizona is not a monopolistic state fund. A.R.S. § 23-961 names two lawful paths. Buy a policy from an insurance carrier authorized by the Department of Insurance and Financial Institutions, or qualify with ICA as self-insured. Ordinary first-hire shops do not self-insure. Patriot’s registration article says you can sign up through a private provider or a state-operated fund. That state-fund line is what the software page says. ICA’s FAQ tells you to buy from a licensed private carrier. A payroll login is not a policy.

ICA may assess $1,000 for going bare, $5,000 for a second instance in five years, and $10,000 for a third. If a worker is hurt while you are uninsured, the Special Fund can seek reimbursement plus a penalty of 10 percent of benefits or $1,000, whichever is greater.

How Gusto and Patriot describe Arizona

Confirm the live withholding ID on AZTaxes.gov. That ID is the federal EIN. Confirm the unemployment account and rate on the DES Tax and Wage System and on the Determination of Unemployment Insurance Liability. Confirm workplace injury insurance with a licensed carrier or on ICA’s employer FAQ.

Gusto’s Arizona help article says Middesk (Gusto’s business-verification company) may register state income-tax withholding and state unemployment insurance (SUI). Confirm the live numbers on AZTaxes.gov and the DES Tax and Wage System. Confirm the rate on the DES notice. The withholding ID to confirm is the federal EIN, not a separate ADOR number. Read Gusto’s Arizona article. See Gusto on the directory.

Patriot’s tax table says Full Service files Arizona Unemployment Insurance (SUI or SUTA) on Form UC-018. It also lists Arizona Job Training Tax and a Special Assessment, when applicable, on that same quarterly report. It files Arizona income-tax withholding on Form A1-QRT and the annual Form A1-R. Patriot’s registration article tells you to file the Arizona Joint Tax Application (Form JT-1 / UC-001) with ADOR, which forwards a copy to DES. It does not claim Patriot opens those accounts. The same article prints a 2.0 percent new-employer SUTA rate for 2026. Use the rate on your DES notice, not a number from a software page. The article also says workplace injury insurance can come from a private provider or a state-operated fund. ICA and A.R.S. § 23-961 do not offer a Washington-style state fund. Read Patriot’s article and Patriot’s registration article. See Patriot on the directory.

What still sits on the employer

• Decide that the $1,500-quarter test, or the 20-week test, has been met. Household, agricultural, successor, Federal Unemployment Tax, and 501(c)(3) shops use other tests.
• Complete the Arizona Joint Tax Application (Form JT-1 / UC-001) on AZTaxes.gov so ADOR can open withholding and DES can review unemployment.
• Hold the DES 8-digit unemployment account number from the Determination of Unemployment Insurance Liability. Do not substitute a federal EIN for that DES number.
• Treat the ADOR withholding ID as the federal EIN. There is no second Arizona withholding number.
• Enter the tax rate from the DES notice, not a marketing figure. Confirm the $8,000 wage base on the live DES page.
• File the quarterly unemployment wage report in the Tax and Wage System after liability begins.
• Collect Form A-4 within five days of hire. If the worker does not elect, withhold at 2.0 percent. File Form A1-QRT and Form A1-R, or Form A1-APR if ADOR places you on the annual schedule.
• File the Arizona new-hire report within 20 days of hire or rehire after 60 days. A quarterly UC-018 does not satisfy that clock.
• Buy workplace injury insurance when you regularly hire, including one part-time worker. ICA does not sell that policy. Payroll software does not issue that policy.
• Do not copy another state’s clock onto Arizona. Arizona can share a start file. Arizona does not finish on one portal. Arizona does not use California’s $100-quarter test. Arizona does not skip state paycheck withholding the way Washington does. Arizona does not use Florida’s four-employee workplace-injury wait. Arizona does not use Washington’s exclusive state fund. Arizona’s EIN-as-withholding-ID rule is not New Jersey’s NJ-REG suffix.

Also forming a company in Arizona? Process Score compares registered agents there.