Arkansas Payroll Tax Guide (2026)
Arkansas cut the top of its withholding formula again for 2026, dropping from 3.90 to 3.70%, while the unemployment wage base stays at $7,000, one of the lowest in the country, and the minimum wage holds at $11.00 an hour.[8]
Arkansas payroll at a glance
Arkansas has two state payroll taxes: graduated income tax withholding taken from employee pay, and unemployment insurance contributions the employer funds alone on the first $7,000 of each worker’s wages.[8]
What changed for Arkansas payroll in 2026
Six items moved for Arkansas employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.
2026 Arkansas payroll tax calculator
Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.
Employer pays
Withheld from the employee
State income tax withholding is not included above: it depends on the employee’s Form AR4EC, Employee’s Withholding Exemption Certificate and filing status, so it cannot be estimated from gross pay alone.
Payroll tax rates & the nexus question
Arkansas runs three state payroll taxes. The table below is the whole state layer for 2026.[8]
The state payroll taxes
| Tax | Paid by | 2026 rate | Wage base |
|---|---|---|---|
| UI | Employer | 0.200%–10.100%; 2.0% new | $7,000 |
| Administrative assessment | Employer | Varies | $7,000 |
| Income tax withholding | Employee | 0.00%–3.70% | No limit |
The DWS employer contributions page still listed only 2025 figures when checked on 20 August 2026: a 2.0% new employer rate made up of a 1.9% base plus a 0.1% administrative assessment, with experience rates from 0.200 to 10.100%. The DOL January 2026 table instead reports a 1.8% new employer rate and a 0.10 to 6.00% range for Arkansas. Because the two disagree and DWS has published no 2026 figures, rely on the Experience Rating Notice DWS mailed you by 1 February 2026. Published rates include the 0.200% stabilization rate for 2026. No administrative assessment is listed for 2026. Employers should rely on their own Experience Rating Notice.[8]
Supplemental wages have their own rate. Bonuses, commissions and other supplemental payments are withheld at 3.70% when paid separately from regular wages. That is a state rate only; federal supplemental withholding is a separate 22% layer.[2]
Who has to register
An entity becomes an employer once it has one or more individuals in employment for some portion of ten or more days in a calendar year, or acquires all or part of a covered business. Domestic employers are liable at $1,000 of cash wages in a quarter, and agricultural employers at $20,000 in a quarter or 10 workers in 20 different weeks.[8] Income tax withholding is administered separately by Arkansas Department of Finance and Administration, so most employers end up with two state account numbers, not one.
Multistate and remote employees
When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.
- 1. Localisation of service→
- 2. Base of operations→
- 3. Place of direction & control→
- 4. Employee’s residence
One remote employee is usually enough. A single person working from home in Arkansas generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.
Confused by Arkansas’s payroll withholding & filing rules?
We handle registration, filings, and year-end forms so your team runs payroll without the guesswork.
Ask a Payroll SpecialistRegistration & return filing
Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.[8]
How to register
- Cross the wage threshold→
- Tax21, the DWS online unemployment insurance employer services system→
- Receive account number→
- Experience Rating Notice, mailed on or before February 1 each year and binding unless review is requested within 30 days of the mailing date→
- File & deposit online
An entity becomes an employer once it has one or more individuals in employment for some portion of ten or more days in a calendar year, or acquires all or part of a covered business. Domestic employers are liable at $1,000 of cash wages in a quarter, and agricultural employers at $20,000 in a quarter or 10 workers in 20 different weeks.[8]
Deposit schedule
Every new registration starts as a monthly filer and pays with Form AR941M by the 15th day following the reporting period. DFA reclassifies an employer as an annual filer when total Arkansas income tax withheld for the year comes in under $1,000.[2]
Returns, reports & due dates
| Form | What it is | Due |
|---|---|---|
| Form DWS-ARK-209B, Employer’s Quarterly Contribution and Wage Report | Quarterly unemployment return | April 30, July 31, October 31, January 31 |
| Form AR941M monthly payment voucher, Form AR941A annual report, Form AR3MAR annual… | Income tax withholding returns | Every new registration starts as a monthly filer and pays with Form AR |
| Annual reconciliation | Year-end withholding reconciliation | February 28 |
| Form 941 | Federal quarterly return | Last day of the month after quarter end |
| Form 940 | Federal unemployment, annual | January 31 |
| New hire report | Report of newly hired employees | Within 20 days of start date |
Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.[8]
Payroll Pricing
Simple, transparent pricing, no setup fees, no year-end surprises. One flat charge per pay run.
CROWNGLOBE
extra
extra
extra
extra
Subject wages vs. exempt payments
Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.[8]
Subject wages
- Salaries, hourly pay, overtime and piece rates
- Commissions, bonuses and incentive pay
- Most cash tips reported by the employee
- Vacation, holiday and paid sick leave when taken as wages
- Severance and payments in lieu of notice
- The cash value of meals and lodging provided as compensation
- Employer contributions to a non-qualified deferred compensation plan
Not subject
- Reimbursements of genuine business expenses under an accountable plan
- Employer contributions to a qualified retirement plan
- Employer-paid premiums for accident and health insurance
- Most third-party sick pay after the sixth calendar month
- Payments to a genuine independent contractor
- Workers compensation benefits
The wage base is per employer, per year, not per job. If you hire someone in August who already earned $7,000 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.
Glossary of key terms
- Taxable wage base
- The slice of each employee’s annual pay that unemployment tax is calculated on. In Arkansas that is $7,000 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
- Experience rating
- The method Arkansas Division of Workforce Services uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
- New employer rate
- The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
- Form AR4EC, Employee’s Withholding Exemption Certificate
- The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Arkansas Department of Finance and Administration.
- Reserve account
- The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
- Successor employer
- A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
- Localisation of service
- The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
- FUTA credit reduction
- A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
- Supplemental wages
- Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Arkansas payroll tax, layer by layer
Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.
Layer 1: Federal
| Tax | Rate | 2026 base |
|---|---|---|
| Social Security | 6.2% each side | $184,500 |
| Medicare | 1.45% each side | No limit |
| Additional Medicare | 0.9% employee only | Over $200,000 |
| FUTA, standard | 0.6% net | $7,000 |
| Federal income tax | Per Form W-4 | No limit |
Arkansas has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.[14]
Layer 2: State
| Tax | Rate | 2026 base |
|---|---|---|
| UI, new employer | 2.0% | $7,000 |
| UI, experienced | 0.200%–10.100% | $7,000 |
| Administrative assessment | Varies | $7,000 |
| Income tax, standard | 0.00%–3.70% | No limit |
| Income tax, supplemental | 3.70% | No limit |
Layer 3, county & city: no payroll tax, but a wage floor
No county or city in Arkansas levies its own payroll or income tax withheld by employers. The local layer shows up as minimum wage, not as tax.[11]
The state minimum wage is $11.00 an hour, effective 2021-01-01. The tipped cash wage is $2.63. No local ordinance sets a higher floor. Arkansas has no local minimum wage ordinances. The state act reaches employers with four or more employees; smaller employers that are nevertheless covered by federal law still owe the federal $7.25 an hour.[11]
Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.[12]
Arkansas payroll FAQs
The DFA withholding tax formula effective 1 January 2026 starts at 0.00% on the first $5,599 of net taxable income and tops out at a 3.70% marginal rate. That is down from the 3.90% top rate that applied for 2025. The formula also builds in a 2,470 dollar standard deduction and a 29 dollar credit for each exemption claimed on Form AR4EC.
DFA’s employer instructions tell you to deduct 3.7% of the bonus or commission for state income tax. The instructions themselves note this can over-withhold for some employees, which comes back to them as a refund when they file. DFA does not publish a separate aggregate method for supplemental wages.
Every new registration is classified as a monthly filer and pays with Form AR941M by the 15th day following the reporting period. DFA moves you to annual filing when total Arkansas income tax withheld for the calendar year is under $1,000. Annual filers report on Form AR941A, which is due 31 January.
Form AR3MAR, the Employer’s Annual Reconciliation of Income Tax Withheld, is due 28 February. The W-2s with the ARW-3 transmittal and any 1099s are due earlier, on 31 January. If the business terminates during the year, AR3MAR is due within 30 days after the business ends.
Use your Experience Rating Notice. DWS mails it on or before 1 February each year and it is final and binding unless you file a written application for review and redetermination within 30 days of the mailing date. As of 20 August 2026 the public DWS rate page still showed 2025 figures, so the notice is the only reliable source for your current rate.
The Arkansas Minimum Wage Act covers employers with four or more employees, at $11.00 an hour since 1 January 2021. Tipped employees must receive a cash wage of at least $2.63 an hour, and the employer has to make up the difference whenever tips do not carry the worker to the full $11.00.
$7,000 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.
$11.00 an hour. No local ordinance sets a higher rate. The tipped cash wage is $2.63.
April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.
Sources & methodology
- Arkansas Department of Finance and Administration – Withholding Tax
- Arkansas Department of Finance and Administration – Withholding Tax Formula, Tax Year 2026, Effective 01/01/2026
- Arkansas Department of Finance and Administration – Withholding Tax Instructions for Employers, revised 4/27/26
- Arkansas Department of Finance and Administration – Withholding Tax Branch
- Arkansas Department of Finance and Administration – Withholding Tax Due Dates
- Arkansas Department of Finance and Administration – Arkansas Tax Brackets 2025
- Arkansas Division of Workforce Services – Employer UI Contributions
- Arkansas Division of Workforce Services – Unemployment Insurance Employer Handbook
- Arkansas Division of Workforce Services – Employer UI Information
- Arkansas Division of Workforce Services – Tax21 Employer Portal, UI Tax Registration and Quarterly Reporting
- Arkansas Department of Labor and Licensing, Labor Standards – Minimum Wage and Overtime
- U.S. Department of Labor, Wage and Hour Division – Fact Sheet 17A: Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees
- U.S. Department of Labor, Employment and Training Administration – Significant Provisions of State Unemployment Insurance Laws, January 2026
- Federal Register, U.S. Department of Labor – Notice of the Federal Unemployment Tax Act (FUTA) Credit Reductions Applicable for 2025
Need help with Arkansas payroll compliance?
CrownGlobe runs payroll for U.S. businesses in every state, registration, withholding, filings, and year-end forms.
Running payroll in more than one state?
Arkansas alone means its own registration, its own deposit calendar and its own year-end reconciliation. Add a second state and the work compounds rather than doubles. CrownGlobe runs multistate payroll end to end: registration, deposits, quarterly returns and year-end.
Explore payroll processing services →Browse all state payroll guides →
Book a free consultation →