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Version: 2.0.0

Texas Payroll Tax Compliance

Employers in Texas must meet two key state payroll compliance obligations: unemployment insurance (UI) and new hire reporting.

Unlike many states, Texas does not impose a state individual income tax, so employers do not have a Texas state individual income tax withholding return for employee wages. Texas payroll compliance is primarily administered through the Texas Workforce Commission (TWC) for unemployment insurance and the Texas Attorney General's Office for new hire reporting.

Texas State Income Tax Requirements​

Texas does not impose an individual state income tax. Therefore, employers are not required to withhold Texas individual income tax from employee wages or file a Texas state income tax withholding return.

Employers must still comply with federal income tax withholding and reporting requirements, including federal Forms W-4 and W-2.

Texas Unemployment Insurance (UI) Requirements​

Employers that are liable for Texas unemployment insurance must report employee wages and pay unemployment insurance taxes to the Texas Workforce Commission (TWC).

An employer may become liable for Texas unemployment tax based on factors such as having employees subject to the Federal Unemployment Tax Act (FUTA), paying at least $1,500 in total gross wages in a calendar quarter, or having at least one employee for a minimum of one hour per day during 20 different weeks in a calendar year.

Texas employers are required to report UI wages and pay unemployment taxes electronically, unless an applicable hardship waiver has been granted.

Forms required​

Form C-3

  • Filed quarterly as the Employer's Quarterly Report.
  • Used to report the employer's total wages and taxable wages paid during the quarter and calculate the Texas unemployment tax due.
  • Quarterly reports are generally due April 30, July 31, October 31, and January 31.
  • Employers must file a report even when there are no workers or no wages to report.
  • TWC requires employers to file the quarterly UI wage report electronically unless an approved hardship waiver applies.

TaxBandits API supports the automation of C3. See how it works

Form C-4

  • Filed as the Wages List supporting Form C-3.
  • Used to report individual employee wage information for the quarter.
  • The employee-level wage information reported on Form C-4 supports the total and taxable wage amounts reported on Form C-3.
  • Form C-4 is therefore a supporting component of the quarterly C-3 filing rather than a separate unemployment tax return.

Texas New Hire Reporting​

  • Employers must report all newly hired and rehired employees to the Texas Employer New Hire Reporting Operations Center, administered by the Texas Attorney General's Office.

  • New hires and rehires must generally be reported within 20 calendar days of the employee's hire date.**

  • Employers that report electronically may submit reports at least twice each month, with reports submitted no more than 16 days apart.

  • Required information generally includes the employer's FEIN, name and address, and the employee's name, Social Security Number, address, and first day of paid work.

  • Texas also requires reporting of certain independent contractors whose income is required to be reported on Form 1099-MISC.

  • New hire reporting helps enforce child support obligations and reduce unemployment and public-benefit fraud.