How to Do Payroll in Arizona: A Step-by-Step Guide for New Employers

Last reviewed: July 2026

Running payroll in Arizona involves a mix of federal and state obligations, and most new employers underestimate how much lead time the state registrations need. Below is the order that actually works: get your federal number first, then layer in the two state accounts, then build your pay calendar around both.

Step 1: Get a Federal EIN

Your Employer Identification Number is the federal tax ID tied to every payroll filing you'll make, state or federal. Apply for free at the IRS EIN Assistant, and you'll typically get the number the same session. You need it before you can open either Arizona state account, so treat it as the first domino.

Step 2: Register With Arizona State Agencies

Arizona splits employer registration across two agencies, and both need attention before you hire anyone.

• The Arizona Department of Revenue issues your state withholding account. Register at azdor.gov so you can withhold and remit state income tax from paychecks.
• The Arizona Department of Economic Security (DES) issues your unemployment insurance account. Register through the agency's unemployment employer portal to get your SUI account number and initial tax rate.

From the Payroll Desk

Don't wait for a signed offer letter to start these registrations. Both can take a week or more to process, and you can't legally withhold or deposit state tax without an account number.

You'll also need to check whether your industry or city requires anything extra. Arizona's Industrial Commission of Arizona handles labor standards and workers' compensation rules, and most employers are required to carry workers' comp coverage from the day they hire their first employee.

Step 3: Set Up Arizona State Withholding

Once your Department of Revenue account is open, every new employee completes Arizona Form A-4, the Employee's Arizona Withholding Percentage Election. Instead of allowances like the federal W-4, Arizona uses a flat percentage of gross taxable wages: employees pick from 0.5% up to 3.5%, in half-point steps. If someone doesn't return the form within five days of starting, you're required to withhold at the default 2.0% rate until they submit one.

Employees who expect no Arizona tax liability for the year can elect a zero percent withholding rate on the same form. Keep a signed A-4 on file for every employee the same way you keep their federal W-4; it's the record that justifies whatever percentage you're applying at payroll time.

Step 4: Handle Arizona Unemployment Insurance (SUI)

SUI is an employer-paid tax, not something you deduct from wages. New Arizona employers start at a 2.0% rate for at least two calendar years, applied to the first $8,000 of each employee's wages for the year. Once you've built a claims history, DES recalculates your rate annually using a reserve-ratio formula that rewards employers with fewer unemployment claims against their account.

Quarterly wage reports and SUI payments go through the same DES employer portal you used to register. Missing a quarterly report, even with zero wages to report, can trigger a compliance notice, so keep it on your calendar even in slow quarters.

Step 5: Choose a Pay Frequency and Learn Final-Pay Rules

Arizona law (A.R.S. Section 23-351) requires at least two fixed paydays every month, spaced no more than 16 days apart. Weekly and biweekly schedules both satisfy this comfortably; monthly pay does not, since a single monthly payday falls outside the 16-day window. Pick a frequency your payroll software supports and stick to it, since changing paydays after employees are used to a schedule invites wage complaints.

Final pay has its own timing rules. Regular wages owed at separation follow the normal payroll schedule in most cases, though Arizona gives employers a short window to deliver the final check depending on how it's issued. Review our Arizona Payday Laws guide before your first termination so you're not guessing under pressure.

Deposit and Filing Calendar

Once employees are on payroll, you're tracking two separate deposit and filing tracks at once:

• Federal: Withheld income tax plus Social Security and Medicare taxes get deposited through EFTPS on a monthly or semi-weekly schedule, then reconciled quarterly on Form 941. See our Form 941 guide for the full deposit and filing mechanics.
• Arizona: State withholding deposits generally follow your federal deposit schedule, while SUI wage reports and payments are filed quarterly through the DES portal.

Most small employers land on a monthly federal deposit schedule in their first year, which keeps the Arizona side in sync since the state largely mirrors the federal cadence for withholding deposits. Set calendar reminders around the 15th of each month and each quarter's filing deadline so nothing slips.

Year-End W-2 Filing

At year-end, every employee who received wages gets a Form W-2 reporting federal and Arizona wages, withholding, and Social Security and Medicare amounts. Employees must receive their copies by January 31, and you file copies with the Social Security Administration and the Arizona Department of Revenue on the same general timeline. Payroll software handles this automatically for most small employers, generating and e-filing W-2s alongside your final quarterly returns.

If you're still deciding how to run this whole process day to day, a paycheck calculator is worth bookmarking while you set things up: try our Arizona paycheck calculator to check withholding math, and our W-4 helper when a new hire isn't sure how to fill out their federal form.

Frequently Asked Questions

How do I set up payroll for the first time in Arizona?

Get a federal EIN from the IRS, register with the Arizona Department of Revenue for state withholding, register with the Arizona Department of Economic Security for SUI, set a pay frequency that meets state law, and choose a payroll system before your first payday.

How often do I have to pay employees in Arizona?

Arizona law requires at least two fixed paydays each month, no more than 16 days apart. Weekly and biweekly schedules also satisfy this rule as long as the gap between paydays never exceeds 16 days.

What is the Arizona SUI new employer rate?

New Arizona employers pay a 2.0% SUI rate for at least their first two calendar years, applied to the first $8,000 of each employee's wages for the year. After that, the Arizona Department of Economic Security assigns a rate based on your unemployment claims history.

Do I need to file anything with Arizona for state withholding?

Yes. Each employee completes Arizona Form A-4 to choose a withholding percentage between 0.5% and 3.5% of gross taxable wages. If an employee doesn't return the form within five days of hire, you withhold at the 2.0% default rate until they do.

Running Arizona payroll by hand works for a month or two, but the state registrations, deposit schedules, and year-end filings pile up fast once you have more than one or two employees. Gusto calculates and files both federal and Arizona payroll taxes automatically, handles new-hire reporting, and generates W-2s at year-end, so you're not tracking every deadline in a spreadsheet.