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US Payroll Tax Guide: New York

Managing payroll in New York? Read our state-by-state guide to US payroll taxes to learn what you must withhold and deduct from employee wages.

Gabriele Culot
Written by Gabriele Culot
July 26, 2023
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Key takeaways

  1. Employers with employees in New York must contribute to the state unemployment insurance program.
  2. New York state also requires employers to contribute to the Re-Employment Service Tax Fund, State Disability Insurance, and Paid Family Leave.
  3. When you hire one employee in New York, you’ll need to start paying for workers’ compensation insurance in New York.

Employers must navigate various regulations and requirements to ensure proper payroll withholding in each US state. On top of withholding federal taxes such as Medicare and Social Security taxes, you are also responsible for withholding and paying certain New York state taxes from your employee’s payroll. These taxes together are referred to as employer payroll taxes or payroll withholding. 

This guide introduces what employers need to pay and withhold from payroll in New York, including unemployment insurance, personal income tax, and workers' compensation. 

Paying Unemployment Insurance 

Unemployment Insurance (UI) is a national program administered by the US Department of Labor and provides temporary payments to people who are unemployed through no fault of their own. Although UI is a joint state-federal program to help unemployed individuals, employers in New Mexico must contribute to state unemployment insurance. 

Unemployment insurance is paid by the employer and the rate may change from year to year. You can manage your New York payroll taxes through an online portal through the New York Department of Labor. The site also offers answers to FAQs, rate change information, and more. 

Paying your Re-employment Service Fund Tax 

On top of paying your New York Unemployment Insurance, you will also have to contribute to the state’s Re-employment Service Fund. The Re-employment Service Fund develops automated programs and funds staff positions to administer unemployment insurance programs to help people who are out of work look for jobs. 

This tax is based on your quarterly reporting. You can file your quarterly reporting with the New York Department of Labor. For more information on filing and contributing to the Re-employment Service Fund, the state provides a breakdown of the service.

Withholding Personal Income Tax from your New York Employee 

Personal Income Tax is a tax on the income of New York residents. Personal income tax is deducted from the employee’s wages and is withheld by the employer. The New York Department of Taxation and Finance provides the following information on withholding and paying your employee’s personal income tax. For more information on withholding personal income tax from your employee, New York provides a quick guide to who you must withhold tax for and a comprehensive Employer’s Guide to to Unemployment Insurance, Wage Reporting, and Withholding Tax

Paying State Disability Insurance

The State Disability Insurance (SDI), unlike workers’ compensation, provides temporary benefit payments to workers for non-work-related illness, injury, or pregnancy. You can purchase SDI through private insurance carriers or NY State Insurance Fund (NYSIF). Please note that you cannot pass on any SDI coverage costs to your employee. The New York Workers’ Compensation Board provides a breakdown to assist you in finding disability insurance coverage.

Withholding Paid Family Leave from your New York Employee 

Paid Family Leave (PFL) benefits generally extend to people who can’t work because they need to care for a seriously ill family member, bond with a new child, or participate in a qualifying event because of a family member’s military deployment. PFL is typically added onto your SDI coverage. However, unlike SDI, PFL is funded through employee payroll contributions to match the cost of coverage. The New York State website provides a thorough resource explaining the program for employers. 

Paying your New York Workers’ Compensation 

On top of paying your New York payroll taxes, you will also need to pay for workers’ compensation in the state. Workers’ compensation, unlike State Disability Insurance, is insurance for an employee’s injury while performing their job. Employers are required to pay for workers’ compensation in New York even if you only have one employee living there.

Employers can buy workers’ compensation insurance through the state fund or a commercial insurance carrier. New York State’s Workers’ Compensation Board provides tips to assist you in finding disability insurance coverage.

Please be sure that you verify that your workers’ compensation insurance is compliant with the state’s regulations for workers’ compensation. 

Optional Employer Compensation Expense Program

On top of paying your New York payroll taxes, you will also have the option to affirmatively opt into the Employer Compensation Expense Program. If you choose to opt into the program, you would pay a state tax on annual payroll expenses that are in excess of $40,000 per employee and eligible employees. 

New York Department of Taxation and Finance provides more information about the affirmative opt-in Employer Compensation Expense Program. If you decide to opt into the program, you can file and pay your taxes for the program online.

Simplify US payroll tax compliance with Deel

While this guide provides essential information on New York payroll taxes, payroll compliance and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel. 

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.

Disclaimer: This article is provided for general informational purposes and should not be treated as legal or tax advice. Consult a professional before proceeding.

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