New York State employers are responsible for withholding taxes from employee paychecks to pay state income tax. Employers also withhold local taxes for New York City and Yonkers employees and contribute to the state’s unemployment fund.
Before you start withholding or paying payroll taxes in New York State, read through these guidelines to set your business up for success.
Step 1: Register Your Company for State, Local, and Unemployment Tax Filings
After registering your business for a Federal Employer Identification Number, better known as an FEIN, and enrolling in the Electronic Federal Tax Payment System to pay your federal taxes online, you need to complete the registration process with New York State.
New York State has a state income tax, unemployment tax, and local tax in Yonkers and New York City.
At a minimum, you’ll need to register your business for state income tax and unemployment tax payments. But if you have employees who work in Yonkers or New York City, you’ll also need to register in those localities to be able to withhold local taxes from those employees.
For all New York payroll taxes, you’ll register an account with the New York State Business Express portal. The portal walks you through creating a NY.gov ID if you don’t yet have one, followed by the necessary registrations for each tax.
Unlike other states with some localities that charge an income tax, New York State lumps New York City and Yonkers taxes together with state tax in terms of registration and employee paperwork. So, once you register to pay taxes in New York State, you’ll also be registered to collect and pay local taxes for employees subject to Yonkers and NYC income tax.
Step 2: Report New Hires to New York State
When you hire new employees in New York, you’ll need to report them to the state within 20 calendar days of their hire date. If you report electronically, you can, instead, submit two monthly reports between 12 and 16 days apart.
First, register an account with the New York New Hire Online Reporting Center. You’ll need your FEIN to register your account.
Then, collect the required information from your new employees. New York requires you to collect the employee’s name, address, hire date, Social Security number, and the date the employee qualifies for dependent health benefits, if available.
For New York new hire reporting, you’ll need each employee to fill out the federal W-4 and I-9 forms plus state Form IT-2104. This holds all the information necessary to determine how many allowances an employee gets and whether they are subject to New York City or Yonkers income taxes.
You can submit this form electronically through the online new hire reporting system, fax it to 518-320-1080, or mail it to:
New York State Dept of Taxation and Finance
New Hire Notification
PO Box 15119
Albany, NY 12212-5119
Step 3: Calculate and Pay Tax Withholdings
New York State requires employers to withhold taxes on any compensation considered wages, including their gross wages or salary, deferred compensation, unemployment benefits, and tips.
Employers paying supplemental wages, like commissions or bonuses, can choose whether to lump all payments together and withhold the required amount of taxes for the full payment or separate the supplemental wages and withhold taxes based on the supplemental rate of 11.70%.
New York’s tax rates for regular wages range from 4% to 10.9%, depending on the employee’s tax bracket.
The state has helpful tax rate tables available for employers, allowing you to see the exact amount to withhold from employee paychecks based on how much they earned in a pay period.
Let’s look at an example of an employee with two exemptions noted on Form IT-2104. The employee gets paid biweekly and earned $1,250 for the current pay period in total regular and supplemental wages, which the employer lumps together in one payment.
Looking at the tax rate table for this amount, we’re told to withhold $43.80 for an employee with two exemptions.
Now, you’ll need to calculate local taxes for any employees subject to NYC and Yonkers income tax. NYC’s tax rate is 3.078% to 3.876%, and Yonkers’ tax rate is 16.75% of a calculation that includes several deductions, which you can see in these Yonkers tax rate instructions.
You can also use tax rate tables for Yonkers residents to make withholding easier. The Department of Taxation and Finance also has NYC tax rate tables for taxable incomes under $65,000 and for employees with taxable incomes higher than $65,000.
Let’s say our employee earning $1,250 for this biweekly pay period lives and works in New York City. Their income would be lower than $65,000 ($1,250 x 26 = $32,500), so we’ll use the tax rate table for taxable income under $65,000. Let’s assume that their annual taxable income would be $25,000 after deductions and that the employee qualified for the head of household tax status.
According to the table, this employee’s NYC tax for the year would be $843, or $32.42 per pay period. So, for this pay period, the employee’s withholdings are $76.22 for state and NYC taxes.
You can file New York State, New York City, and Yonkers withholdings together. Employers that have at least $700 withheld from any payroll must file Form NYS-1 after the payroll in which they went over this threshold, which may be every week or bi-weekly, depending on when you pay your employees.
If you have less than $700 withheld in a quarter, you can file Form NYS-45 quarterly instead. It’s due on April 30th, July 31st, October 31st, and January 31st.
You can file either form online via the Department of Taxation’s Online Services portal.
Step 4: Calculate and Pay Employer Tax Contributions
Next are unemployment tax calculations for New York. You don’t withhold this tax from employee paychecks, as it’s paid only by employers. However, you need to know how much an employee makes to withhold the correct amount.
The unemployment tax rate in New York ranges from 2.025% to 9.825%, and new employers get a rate of 4.025% until the state changes it.
Employers only pay this tax on a set amount of wages an employee earns each year, known as a wage base. For 2024, New York’s wage base is $12,500, meaning you’ll only pay unemployment tax on the first $12,500 in earnings for each employee. If an employee makes less than that, you’ll pay the tax on what they actually earn.
Let’s use our previous example of an employee earning $32,500 a year and getting paid biweekly.
This employee’s earnings are over the $12,500 threshold, so you’ll pay unemployment tax on the full $12,500. If you have the new employer rate of 4.025%, you’ll pay $503.13 for this employee.
Conveniently, you file and pay this tax quarterly with state and local taxes using Form NYS-45.
Instead of Running New York State Payroll Yourself, Do This Instead
New York taxes aren’t the easiest to figure out, especially if you have employees subject to Yonkers or New York City withholding. Running payroll manually can put you at risk of making small calculation mistakes that eventually snowball into massive errors requiring a lot of time to fix.
No one wants to end up on the wrong side of Uncle Sam.
Instead, think about equipping your business with payroll software from the start. A reliable payroll system stays updated with New York’s payroll laws and tax rates to keep your payroll compliant. It handles calculations and transfers the money you need to pay the state, allowing you to play a more hands-off role in your payroll.
And if there’s anything it can’t do automatically, it sends you reminders of what to do and when to help you stay on track.
I never tell business owners that running payroll manually is fine because, frankly, it can cause many issues that you can avoid with payroll software. Invest in a payroll tool now to handle your New York State payroll, and it won’t take you long to realize why you did.
