New York (NY) State Withholding Information
Payroll in NY state can be confusing and difficult even for seasoned payroll professionals. There are a lot of taxes to calculate and pay along with a variety of returns to file. In addition to state taxes, there are also city-specific taxes for residents of New York City and Yonkers. Finally, there are reciprocal agreements with nearby states that can impact which taxes need to be calculated and taken out.
Calculating NY State Withholding Tax
To start, NY state has the following taxes when calculating payroll: NY State Withholding tax, NY State Unemployment tax, New York City Withholding tax, and Yonkers Withholding tax. All residents of New York are subject to NY State Withholding regardless of where they earn money. However, to avoid being double taxed, if those wages are subject to other state income taxes, you can reduce your NY State Withholding tax liability by the same amount. For example, if you worked in New Jersey, you would be subject to New Jersey Income Withholding tax, but this is then used to offset your NY State Withholding tax. NY State Withholding is only paid by the employee, not by the company.
To start, NY state has the following taxes when calculating payroll: NY State Withholding tax, NY State Unemployment tax, New York City Withholding tax, and Yonkers Withholding tax. All residents of New York are subject to NY State Withholding regardless of where they earn money. However, to avoid being double taxed, if those wages are subject to other state income taxes, you can reduce your NY State Withholding tax liability by the same amount. For example, if you worked in New Jersey, you would be subject to New Jersey Income Withholding tax, but this is then used to offset your NY State Withholding tax. NY State Withholding is only paid by the employee, not by the company.
The calculation method for the NY State Withholding Tax is a progressive tax system. A progressive tax system is one in which the tax rate changes based on your income. The higher the income, the higher the tax rate.
Calculating New York City and Yonkers Withholding Tax
Moving onto New York City and Yonkers Withholding Tax, they are also progressive taxes. However, only residents of those two cities are subject to those taxes. Similar to the NY State withholding tax though, any earnings by those residents are subject to tax regardless of where the income came from. However, there is no double tax offset as compared to the NY State withholding. The individuals who need to pay the New York City or Yonkers City tax must reside in certain zip codes. If they live in those zip codes, they need to pay; if not, then they’re not subject to the tax. It is important for payroll processors and businesses to tax the correct people and not over-withhold or under-withhold.
Calculating NY State Unemployment Tax
The last tax of NY State Unemployment tax is similar to the Unemployment tax in other states. It is a flat rate tax that has a wage limit. A flat tax is a tax that is calculated at a certain percentage regardless of the taxable income. The default rate for a new New York company is 3.4%. However, this rate can change over time due to a variety of factors. Unlike the previously discussed income tax withholdings, there is a Wage Limit to NY State Unemployment tax. A Wage limit is a cap to the amount of subject wages a year. For NY State Unemployment Tax in 2024, the Wage Limit is $12,500. The Wage Limit changes from year to year so it is important to keep track of. Finally, NY State UI is only paid by the company, not by the employee.
The existence of city-level tax that is administered by the state is very unusual in the United States. It is important to apply the tax correctly in order to avoid problems in the future.
New York Payroll Tax Depositing Schedule
For depositing these taxes, New York has a different schedule than the standard Federal one. Instead of having a schedule set by date, New York does taxes by the amount of tax due. There are three schedules for tax payments in New York. There is a 5-day filer, a 3-day filer, and a PromptTax. For all three schedules, the general idea is once you have exceeded a certain amount of tax liability, you need to make the deposits within 5, 3, or 2 banking days. For all three schedules, once your tax liability exceeds $700; you need to make a deposit within the appropriate time frame. So as an example, if you were a 5-day filer, if you had one payday on Monday that had a liability of $1,000; you need to make the payment by Friday of that week. However, if you had a payday on Tuesday with a liability of $200, you would not need to make any payments. Then if you had another payday on Tuesday the following week with a $200 liability, you still would not need to make any payments. However, on the 4th week when you break the $700 threshold, you would need to make the tax deposit on Monday of the following week.
As another example, If you are on a 3-day deposit schedule, if you had a $1,000 liability payday on Monday, the taxes would be due by Thursday. However, if there was another check with a $1,000 liability on Tuesday, those taxes would be due on Friday.
The important thing to remember is that whenever that $700 threshold is exceeded, the taxes need to be paid by the time determined by your schedule.
New York Payroll Tax Depositing Schedule
All of these taxes are reported on the form NYS-45. The NYS-45 is filed once a quarter and it contains all of the tax information that we discussed above. The return can be e-filed on the New York State Dept of Revenue website or through our system at eSmartPayroll.
The form itself is fairly standard, it contains the company information, the total taxable wages and taxes, and finally the individual contributions and wages. The form also contains the correction section for employee information as well.
Please refer to the NY state website for additional information.
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