Arizona Payroll Taxes: Withholding, Unemployment Tax and Filing Schedules

If you have employees working in Arizona, you carry three payroll tax obligations. You withhold Arizona income tax from each paycheck, you deposit and report what you withhold on a set schedule, and you pay state unemployment insurance tax on each employee's wages. The withholding and reporting run through the Arizona Department of Revenue (ADOR) and its AZTaxes system. The unemployment tax runs through the Arizona Department of Economic Security (DES). This guide covers the rules as they stand for 2026, with the rates and deadlines you need to plan around.

This is informational content, not legal or tax advice. Payroll rules have exceptions, and your deposit schedule depends on your own numbers. Confirm your obligations with ADOR, DES, or a qualified CPA before you run your first payroll.

Who Has to Withhold Arizona Tax

If you pay wages to someone who works in Arizona, plan to withhold Arizona income tax from that person's pay. The only way to change the amount is through the employee's Form A-4, which is covered below. Arizona's individual income tax is a flat 2.5% rate, and the withholding choices are set so that employees can match what they expect to owe.

Arizona does not issue a general statewide business license. Payroll registration and tax filing are a tax matter, handled by ADOR. Your separate licensing questions, such as a Transaction Privilege Tax (TPT) license, are covered later in this guide.

Employee Withholding: Form A-4

Each employee completes Form A-4 to choose a withholding percentage. The options run from 0.5% to 3.5%, in half-point steps. An employee who does not expect to owe any Arizona income tax can choose 0%.

• Choice available: 0.5% to 3.5% in half-point steps, or 0% if no Arizona tax is expected.
• Default: If an employee does not return a Form A-4, withhold 2.0%.
• 2026 form: The 2026 Form A-4 is unchanged from the prior version.

Collect the Form A-4 during onboarding, before the first paycheck. Keep the signed form on file. If an employee never returns one, the 2.0% default applies, and that is the rate you must use. Do not guess a rate for them.

Deposit Schedules

Arizona sets your deposit schedule using your average withholding over the prior four quarters. Because the average changes, your schedule can change from year to year. The three tiers are:

Prior four-quarter average withholding	Deposit schedule
Under $200	Annual
$200 to $1,500	Quarterly
Over $1,500	Federal deposit schedule (monthly, semi-weekly or next business day)

Electronic funds transfer (EFT) is required if you owe $500 or more in a year. Check your own tier against the most recent four quarters before the start of each year, and confirm with ADOR how your average is calculated if your withholding has been uneven.

Quarterly Returns: Form A1-QRT

Form A1-QRT is the quarterly withholding return. You file it every quarter, and you file it even when you withheld nothing that quarter. A zero quarter still needs a return.

Quarter covered	A1-QRT due date
January through March	April 30
April through June	July 31
July through September	October 31
October through December	January 31

If you made every payment on time during the quarter, you get 10 extra days to file. For example, the first-quarter return would be due May 10 instead of April 30. Missing a payment means you lose the extension, so treat the date on the table as the real deadline.

Annual Reconciliation and W-2s

At year end you reconcile what you withheld against what you deposited and what you reported each quarter. The annual reconciliation is filed on Form A1-R or A1-APR, due January 31, and it goes in with your W-2s. Confirm with ADOR which of the two forms fits your situation before you file, since the wrong form creates a correction you did not need.

Build the January 31 deadline into your calendar early. The reconciliation is where the quarterly numbers get checked against each other, so a mismatch from earlier in the year usually shows up here.

Unemployment Insurance Tax (DES)

Arizona unemployment insurance tax is paid by the employer. It is not withheld from employee pay, and the employee does not contribute to it. The tax applies only up to the taxable wage base, so once an employee's wages for the year reach the base, no more unemployment tax is owed on that employee.

• 2026 taxable wage base: $8,000 per employee.
• New employer rate: 2.00%, as shown on the DES rate chart and reported by Bloomberg Tax.
• Your rate: Check your DES rate notice. Your own rate on that notice controls, even if it differs from the chart.

At a 2.00% rate on the full $8,000 base, the most a new employer would pay per employee in 2026 is $160 ($8,000 x 2.00%). Employees who earn less than $8,000 in the year generate less tax. Keep a running wage total for each employee so you know when the base has been reached.

Filing and Paying Through AZTaxes

Withholding deposits, the A1-QRT, and the annual reconciliation are all filed through AZTaxes. Set up your account before your first payroll, and confirm your filing frequency on the ADOR site at azdor.gov. Unemployment insurance reporting is separate. Confirm with DES how your account is set up and how your rate notice gets applied.

A practical routine looks like this:

1. Collect a Form A-4 from every employee and default any missing form to 2.0%.
2. Run payroll and record the withholding for each pay period.
3. Deposit on your assigned schedule, using EFT once your annual amount reaches $500 or more.
4. File the A1-QRT by the quarterly due date, even if the quarter shows zero.
5. Track each employee's wages against the $8,000 unemployment base.
6. File the annual reconciliation with your W-2s by January 31.

Common Mistakes

• Skipping the zero-quarter return. A quarter with no withholding still needs an A1-QRT.
• Guessing an employee's rate. Without a Form A-4, the default is 2.0%.
• Assuming the deposit schedule never changes. The schedule depends on the prior four quarters, so review it every year.
• Using the wrong wage base. Unemployment tax stops at $8,000 per employee in 2026.
• Confusing payroll with licensing. A TPT license is a separate tax license, not a payroll registration.

Licenses That Are Separate From Payroll

Payroll taxes do not replace the other registrations your business may need in Arizona. Keep these separate in your planning:

• Transaction Privilege Tax (TPT) license: Issued by ADOR at $12 per location. It is required for retail sales and other taxable business classifications. Details are at azdor.gov TPT license page.
• City business licenses: Many cities and towns require their own business or TPT license on top of the state license. Check with the city where you operate.
• County licenses: Counties issue no general business license.
• Contractor licensing: The Registrar of Contractors licenses contractors. That license does not replace your payroll obligations.

For entity filings, the Arizona Corporation Commission handles LLC and corporation documents through the Arizona Business Center. Arizona LLCs file no annual report, but for-profit corporations do. Trade name registrations are filed with the Secretary of State, not the Commission.

Where to Confirm Current Figures

Payroll rules, rates and forms change. Before you rely on any figure in this guide, check the current source:

• Arizona Department of Revenue: azdor.gov for withholding rates, Form A-4, deposit schedules, A1-QRT and the annual reconciliation.
• Arizona Department of Economic Security: Your DES rate notice sets your unemployment tax rate. Confirm the current wage base and rate with DES.
• Arizona Corporation Commission: azcc.gov/corporations for entity filings.
• Arizona Small Business Development Center Network: arizonasbdc.com for free advising on setting up payroll.

If you have multiple employees, remote workers in other states, contractors you may be misclassifying, or a business that has changed owners, talk to a qualified CPA or attorney before you file. The rules are simple for a single employee in one location, and they get complicated quickly once those conditions change.

Disclaimer

This guide is informational content only. It is not legal, tax, or accounting advice, and it does not create an attorney or client relationship. Rates, wage bases, due dates and form requirements can change. Confirm every figure with the Arizona Department of Revenue, the Arizona Department of Economic Security, or a qualified professional before you act on it.