Payroll tax in Rhode Island: What employers need to know [2024]

Payroll taxes are a necessary—but often cumbersome—part of running a business. When you operate a business in Rhode Island, you’re responsible for payroll taxes at the federal and state levels. This includes federal income tax, unemployment insurance, FICA taxes (like Medicare and Social Security), and more. 

Unlike many states, Rhode Island has a distinct tax structure with four state-level payroll taxes. Whether you’re a new employer or a seasoned business owner, the intricacies of Rhode Island’s tax system can leave your head spinning. Still, you’ll need to master all the tax regulations in the state—or you could find yourself on the wrong side of the law.

In this guide, we’ll walk you through the fundamentals of filing and paying payroll taxes in the Ocean State, including tax rates, who pays what, and when. Let’s get started.

The 4 Rhode Island payroll taxes

In Rhode Island, the Division of Taxation and the Rhode Island Department of Labor and Training are responsible for administering payroll taxes at the state level. All employers in Rhode Island need to register and pay payroll taxes. Moreover, employers must report new hires to the Rhode Island New Hire Reporting Center within 14 days of their start date.

Rhode Island's payroll tax structure comprises four types. These taxes include state income tax withholding, unemployment insurance (UI) tax, temporary disability insurance (TDI), and job development fund contributions. We’ll break down each one, including who’s responsible for paying them and the associated maximum amounts.

Unemployment insurance tax

The Unemployment Insurance tax is a mandatory contribution that employers in Rhode Island must make to support the state's unemployment insurance program. This program provides temporary financial aid to workers who are facing unemployment and meet Rhode Island's eligibility requirements. The Rhode Island Department of Labor and Training administers this tax. 

The specifics of the UI tax are as follows:

It's important to note that the tax rate can fluctuate annually based on factors such as the employer's history of unemployment claims and the overall health of the unemployment insurance fund. Employers are notified of their specific rates each year.

Temporary disability insurance (TDI) tax 

The Rhode Island Department of Labor and Training manages the TDI tax. This tax provides temporary financial assistance to employees who can’t work due to disability. The TDI tax is unique because it includes contributions from employers and employees.

Job Development Fund tax

The Job Development Fund tax fosters employment growth and training in Rhode Island, administered by the Rhode Island Department of Labor and Training. This tax plays a crucial role in supporting the state's workforce development programs.

State income tax withholding

The Rhode Island Division of Taxation administers state income tax withholding. Employers must deduct a portion of an employee’s income and pay it directly to the state. The tax obligation begins as soon as an employee earns their first paycheck.

The tax rate for withholding is determined by progressive tax brackets provided by the Rhode Island Division of Taxation. Employers must refer to these brackets and the information on the employee’s W-4 form to calculate the exact withholding amount. The tax brackets are:

• 3.75% on the first portion of taxable income (up to a certain amount)
• 4.75% on the next portion of taxable income
• 5.99% on taxable income over a higher threshold

Rhode Island's payroll tax landscape can be complex to navigate—especially with its four tax types. Rippling’s payroll software simplifies the process, ensuring that your business stays compliant. It automatically calculates your taxes and manages all necessary tax forms and payments for you.

Moreover, Rippling’s Professional Employer Organization (PEO) service can take on the responsibility of registering and maintaining your state tax accounts, automating the process even further.

Payroll tax due dates in Rhode Island

Employers in Rhode Island need to follow specific schedules for remitting payroll taxes. The frequency and due dates for these taxes can vary based on the type of tax and the total amount due. 

State income tax withholding deadlines depend on whether you’re a monthly or quarterly filer. Monthly filers must file their withholdings by the 20th day of the following month. Quarterly filers must file by the last day of the month following the end of the quarter.

UI, TDI, and Job Development Fund contributions all follow a quarterly schedule. The due dates are as follows: 

• First Quarter (January-March): Due April 30
• Second Quarter (April-June): Due July 31
• Third Quarter (July-September): Due October 31
• Fourth Quarter (October-December): Due January 31

Employers must be attentive to these dates, as late payments can lead to penalties. The specific penalty rate in Rhode Island can vary, but it generally includes a base penalty of 10% of the tax due, with additional interest accruing over time. 

How to submit payroll taxes in Rhode Island

Now that we've covered the various types of payroll taxes in Rhode Island, including when and what you owe, it's important to know how to submit them effectively. Rhode Island offers several methods for filing and paying payroll taxes. 

Online through eServices

Rhode Island has an electronic filing mandate for larger businesses (those with a combined annual liability exceeding $5,000 or those with an annual gross income of at least $100,000). For a streamlined tax filing experience, employers can utilize the Rhode Island Division of Taxation eServices and submit their payroll taxes using the RI W-3 and RI W-4 forms online. With this online service, employers can:

• File tax returns and submit payments
• Manage account details
• View transaction history and current liabilities

The Rhode Island Division of Taxation's website provides comprehensive guidelines for enrolling in this service.

Express payment 

For employers who prefer a no-enrollment-required option, QuickPay offers a fast and convenient way to make tax payments. You just need your employer tax account number and payment information to pay through the Division of Taxation's QuickPay service.

File by mail

Rhode Island still accepts tax submissions via mail. This option is suitable for employers who are unable to file online or are considered a smaller business registrant. You should mail tax documents to the Rhode Island Division of Taxation. This is the mailing address, as found on the Division’s website:

Rhode Island Division of Taxation
One Capitol Hill
Providence, RI 02908

Other available methods

Employers can also opt for Electronic Funds Transfer (EFT) for direct and secure transactions. With this method, you need to set up a one-time arrangement with your bank for automated tax payments.

Alternatively, Rhode Island accepts credit card payments through authorized third-party providers. This method is convenient but may include processing fees.

Rippling’s full-service payroll software

Streamline the payroll tax process even further with Rippling’s full-service payroll software. Rippling simplifies compliance work by automating the calculation, filing, and payment of federal, state, and local payroll taxes, including those specific to Rhode Island. With Rippling, employers can confidently manage their tax obligations accurately and on time.

FAQs about Rhode Island payroll taxes

Are there local tax laws in Rhode Island?

Rhode Island has local sales tax laws that vary by county.

Can your tax returns be audited in Rhode Island?

Yes. The Rhode Island Division of Taxation can audit tax returns in the state. Businesses should maintain accurate records and be prepared to provide documentation if an audit occurs.

Are nonprofit organizations subject to payroll taxes in Rhode Island?

Nonprofit organizations in Rhode Island are not generally subject to payroll taxes, though there may be some exceptions based on the type of nonprofit and the nature of its activities. Some notable exceptions include 501(c)(3) organizations, religious institutions, charitable services, etc. 

How is the unemployment insurance tax rate for new employers determined in Rhode Island?

For new employers in Rhode Island, the unemployment insurance tax rate is set at a standard rate defined by the state, as mentioned above. This rate is often based on the average rate of existing employers in the same industry. New employers should check with the Rhode Island Division of Taxation or Department of Labor and Training for the current rate and any changes that may apply.

Are there specific payroll tax considerations for businesses with out-of-state employees?

Businesses in Rhode Island with out-of-state employees may need to consider the tax laws of the employee's resident state. However, Rhode Island doesn’t have reciprocal agreements with other states.

Is there a specific process for amending payroll tax filings in Rhode Island?

If a business needs to amend a payroll tax filing in Rhode Island, it must follow the procedures set by the Rhode Island Division of Taxation. This often involves submitting revised forms with the corrected information and explaining the changes. Detailed instructions are available on the Division’s website.

How does Rhode Island's state income tax impact small businesses?

Rhode Island's state income tax can affect small businesses, especially those structured as pass-through entities where business income is taxed at personal income tax rates.

Are there any tax credits available for Rhode Island employers?

Yes, Rhode Island offers various tax credits for businesses, including those that can offset costs related to workers' compensation and FUTA (Federal Unemployment Tax Act). 

How does the federal government's involvement affect payroll taxes in Rhode Island?

The federal government sets guidelines for taxes like Social Security, which are applicable in Rhode Island. Employers must comply with both state and federal regulations to ensure accurate payroll tax processing.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.