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New York Payroll Taxes

New York manages state payroll taxes through the Department of Taxation and Finance.

• Income taxes: New York has a progressive income tax depending on the employee’s income level—from 4% to 8.82%.
  • If employees live in New York City, there is an additional surcharge—from 2.907% to 3.876%.
  • Effective January 1, 2021, supplemental wages, such as bonuses and commission, are taxed at 9.62%.
  • Employees who are residents of Yonkers have an additional surcharge of 1.61135% for supplemental wages.
  • Employees living in New York City have an additional surcharge of 4.25% for supplemental wages.
• Unemployment Insurance (UI): Most employers in New York are also required to pay taxes to provide unemployment insurance through The New York State Department of Labor (NYSDOL).
  • The rate cannot exceed 3.4% and is fixed each year according to the size of the Unemployment Insurance Trust Fund.
  • New employer rate = 4.025% with a RSF rate = 0.075% for a total rate of 4.1%.
• Employer Compensation Expense Tax (ECET): New York employers can also opt to pay an Employer Compensation Expense Tax (ECET) to offset employees’ federal taxes. More on the ECET below.
• Re-employment Services Fund (RSF): All NY employers must pay a tax into the re-employment services fund. This fund provides support and training for the unemployed to help get them back to work. The RSF is a flat tax of 0.075% on the total quarterly payroll.
• State Disability Insurance (SDI) and Paid Family Medical Leave (PFML). New York also requires employees/employers to contribute to State Disability Insurance and Paid Family Medical Leave. Employers can share in the contribution or have employees bear the full responsibility from their wages.

All employers with employees residing in New York state must register for payroll taxes with the New York Department of Taxation and Finance.

Yes, the following conditions exempt New York employees from withholding tax:

• Employees must be under age 18, or over age 65, or full-time students under age 25 and
• Not have incurred any New York income tax liability for the previous year; and
• Do not expect to have a New York income tax liability for the current year.

If employees meet the above criteria, employers must file an IT-2104-E Certificate of Exemption from Withholding form with the Department of Taxation and Finance.

Unemployment Insurance Tax (UI) is a federal program that provides temporary payments to workers that are unemployed, and this employment status is not based on their own actions. Rates vary by state.

The ECET is an optional tax program established by the Employer Compensation Expense Program (ECEP). Participating employers agree to pay an extra payroll tax of 5% on all annual payroll expenses once employees reach the $40,000 threshold. Employees can then claim the credit on their federal tax returns, and employers can deduct the tax on their federal business tax returns. The program was established to offset the SALT cap posed on taxpayers.

State Disability Insurance (SDI) is a program that provides temporary payments to workers for illness and injury as a result of non-work activities, pregnancy, and Paid Family Leave (PFL) benefits.

Withholding income tax from wages paid to household employees is voluntary.

The New York State Registration Number is the business’s Federal Employer Identification Number (EIN) followed by a location code. The registration number is required for all state and local payroll interactions to ensure your account is accurate. You must provide your employer payroll tax account number when filing returns and making deposits in all electronic and paper filings.

• Name and Social Security number of all responsible parties
• Doing Business As (DBA), if applicable
• Physical business address and mailing address
• Business phone number
• Valid email address (contact person and business)
• Nine-digit federal Employer Identification Number (EIN)
• Industry description

An EIN is a Federal Tax Identification Number provided by the IRS. If you do not have an EIN already, CorpNet can obtain one for you via their FTIN service.

CorpNet works with the leading payroll processors and we can connect you with our trusted partners who will pay your employees, accrue the necessary taxes, and complete the necessary payments and documentation with state and federal authorities.