How to do Payroll in New Mexico

Payroll in New Mexico is simple, allowing the state to compete with other states on a level playing field. To make payroll practices simpler for employers and employees alike, we’ve pulled together some of our top tips for doing it right.

New Mexico has different tax withholding forms for the year 2022. The form that is needed for payroll is the new mexico tax withholding form 2022.

When you learn how to process payroll in New Mexico, you’ll see that the state’s labor requirements for hours, time off, and overtime are quite similar to federal standards, so you won’t have as many difficulties as companies in other states. Employers must pay state income tax withholdings on a monthly basis, as well as state Unemployment Benefits (SUTA) once a quarter. In addition, New Mexico mandates you to obtain a private workers’ compensation insurance, which is standard in most jurisdictions.

While the payroll and tax system in New Mexico isn’t particularly sophisticated, payroll software that handles tax filing may make things simpler while keeping you in compliance with wage and labor rules. Gusto is a payroll and tax software that handles payroll and tax requirements in all 50 states and allows you to pay workers by check or direct deposit. Today is the last day to sign up for a free 30-day trial.

Gusto is a great place to visit.

Step-by-Step Instructions for Payroll in New Mexico

Step 1: Register your company as an employer. You’ll need your employer identification number (EIN) and an account with the Electronic Federal Tax Payment System to comply with federal law (EFTPS).

Step 2: Register with the state of New Mexico. Register for an account with the New Mexico Taxpayer Access Point to pay state income tax withholdings. This is also where you register your firm and acquire your CRS, or tax identification number. You may also fill out and submit an ACD-31015 form to your local tax office.

Create an account with the New Mexico Department of Workforce Solutions to pay SUTA. You’ll need your company’s details, such as the date your workers started working in New Mexico, a gross quarterly salary summary, and a description of services. You’ll obtain an Employer Account Number (EAN) and access to the Unemployment Benefits (UI) Tax System after you’ve enrolled.

Step 3: Create a payroll system. Establish a regular paycheck schedule that is at least twice a month (except for executives and supervisors, who can be monthly). You must already have a payroll process in place before you can create a payroll schedule. If you don’t, use our tutorial to learn how to set up payroll on your own.

Collect employee payroll paperwork in step four. Employee onboarding is the optimum time to fill out payroll papers. W-4, I-9, and a Direct Deposit Authorization Form are among the forms available. The state of New Mexico does not have a W-4 form.

Collect, evaluate, and approve time sheets in step 5. Make sure you account for overtime correctly. Employees might use time sheet templates or time clocks to keep track of their hours.

Step 6: Work out your payroll and pay your staff. Payroll may be calculated using payroll software, a calculator, or simply an Excel template. Learn how to calculate employee payroll.

Step 7: File payroll taxes with the federal government and the state of New Mexico. For federal taxes, including unemployment, follow the IRS’s guidelines.

Recently in the news:

Taxpayers will no longer be able to submit New Mexico withholding tax using Form CRS-1 as of July 1, 2021. Instead, you’ll fill out Form WWT-1, Wage Withholding Tax Return. The Taxpayer Access Point e-filing platform is also being upgraded, with completion expected in July 2021. Taxes in New Mexico and Unemployment Benefits may be filed there. You’ll need your PIN and state tax ID number.

New Mexico income taxes are due on the 25th of the month after the end of the reporting period, unless the 25th falls on a Saturday, Sunday, or legal holiday. The next business day is when it is due.
SUTA: You must file online and pay by ACH debit (automated clearing house).

If a report or tax payment is due on a Saturday or Sunday, the report or payment is deemed timely if it is received on or before the next working day.

Step 8: Keep track of your payroll data. Employee records must be kept for at least one year in New Mexico. Contact and payroll information for the employer and employee should be included. See the pay stub requirements below, then read our article on keeping payroll records for additional information.

Step 9: Complete your year-end payroll tax returns. Send the W-2 (for workers) and 1099 (for non-employees) federal forms (for contractors). The state copy of the W-2 must also be submitted to New Mexico. You may submit Form RPD-41072, Annual Summary of Withholding Tax, but it isn’t needed unless your monthly withholdings were underpaid or overpaid.

Payroll Laws, Taxes, and Regulations in New Mexico

You must withhold money from employee paychecks for income taxes, Social Security (6.2 percent from each employee paycheck and a matching 6.2 percent from your bank account), Medicare (1.45 percent from each employee paycheck and a matching 1.45 percent from your bank account), and federal Unemployment Benefits (6 percent of each employee’s first $7,000 earned), regardless of which state you live in. Learn more about taxes, FICA, and FUTA in this article.

Taxes in New Mexico

There are no municipal income taxes in New Mexico, however there are Income Taxes in Different States. Unemployment Benefits taxes are levied. Unless they have more than 100 employees and are big enough to self-insure, businesses that hire more than three employees must additionally get workers’ compensation insurance.

Income Taxes in Different States

If you withhold federal income taxes for an employee, then you must also withhold Income Taxes in Different States. This includes agricultural workers under some conditions. However, Native Americans who are members of a New Mexico federally recognized Indian nation, tribe, or pueblo and who live on the lands where they are enrolled are exempt.

The income tax rate in New Mexico ranges from 1.7 percent to 5.9 percent. All income is subject to taxation, with rates varying depending on filing status and yearly income. Here are the rates for 2021, as well as detailed filing instructions.

Unemployment Benefits

SUTA is a tax imposed by New Mexico; if you have workers, you must pay it. You must pay if you paid an individual $450 or more in any calendar quarter of the current or previous calendar year, or if you employed one or more people (including part-time employees) in each of 20 calendar weeks of the current or previous calendar year. Farm, household, and charitable groups all have their own set of regulations.

The SUTA is calculated using a $27,000 taxable pay basis. For experienced companies, SUTA rates range from 0.33 percent to 5.4 percent. Your benefit ratio, reserve factor (1.6528 for 2021, determined by Unemployment Trust Fund solvency), and experience history factor are used to compute and assign rates. If that figure is more than 5.4 percent, you’ll need to factor in an excess claims rate, which is a pre-adjusted contribution rate minus 5.4 percent multiplied by 10%. The rate of excess claims cannot be greater than 1%.

New employers are assessed at the rate of their industry average or 1%, whichever is higher. On the New Mexico Department of Workforce Solutions website, you may obtain industry rates as well as a detailed explanation of how experienced rates are established.

Insurance for Workers’ Compensation

If you are a New Mexico business and have three or more employees anywhere in the US with at least one working in New Mexico, you need New Mexico Insurance for Workers’ Compensation. If you do work requiring licenses by the Construction Industries Licensing Act, you must have workers’ compensation coverage, even if you have fewer than three employees.

There are three forms of coverage: traditional, which is appropriate for most businesses; assigned risk pool, which is appropriate for those in high-risk sectors; and self-insurance, which is appropriate for bigger, qualified enterprises. Workers’ compensation insurance is obtained via a licensed insurance broker.

New Mexico’s Minimum Wage Laws

New Mexico, like many other states, is hiking the minimum wage, however it has not announced any hikes beyond 2023.

Most firms are required to pay a minimum wage of $10.50 per hour, with at least $2.55 per hour for tipped workers who make up the difference in tips. For the first 90 days, if you’re training workers under the age of 20, the minimum pay is $4.25 per hour. For the first 20 hours per week, if the worker is a student on work-study, the minimum pay is $8.93.

The hourly minimum wage will increase to $11.50 in 2022, or $2.80 for tipped workers. That’s $12 or $3 in 2023. The rates for minors in training or student work study aren’t available.

Various tariffs apply in different counties and cities. When in doubt, defer to the higher rate, such as for tipped staff. Cities do not differentiate between student and work-study rates.

There are certain exceptions, however:

Minors under the age of 18
Individuals in genuine executive, administrative, or professional positions, as well as foremen, superintendents, and supervisors
Volunteers are those who participate in the operations of an educational, philanthropic, religious, or nonprofit organization without having an employer-employee connection.
Piecework, fixed rate schedules, or commission-based compensation for salespeople or staff
Apprentices and learners who are not otherwise provided for by law
Seasonal workers of an educational, philanthropic, or religious youth camp or retreat who are provided with lodging and board as part of their work.
Any agricultural worker who is a family member, is paid on a piece-rate basis, or whose employer did not utilize more than 500 person-days of agricultural labor in any calendar quarter during the prior calendar year.

Learn more at the New Mexico Department of Workforce Solutions Minimum Wage Website, but keep in mind that the state does not always update changes, so check local websites as well.

Overtime Regulations in New Mexico

Overtime compensation in New Mexico must be at least 1.5 times the usual relevant minimum wage rate. Any hours worked in excess of 40 in a week are considered overtime.

In addition, hotels, restaurants, and cafés may not require workers to work more than 10 hours per day or 70 hours per week. Although the legislation expressly mentions male employees, this regulation should be applied to all employees. Employees’ timesheets must be kept.

Employees mainly in a stand-by position, such as firefighters, law enforcement officers, or farm or ranch laborers whose tasks require them to work longer hours, may not be asked to work more than 16 hours in any 24-hour period, unless in emergencies.

Employees Can Be Paid in a Variety of Ways

Employees in New Mexico may be paid in cash, cheque, or direct deposit provided both the company and the employee agree. Payroll vouchers may also be used if the whole amount of the voucher can be converted to cash.

For additional information, see our tutorial on how to pay your staff.

Pay Stub Regulations

You must submit a written or printed document summarizing the employee’s salary details in New Mexico. Employee and employer names, gross pay, number of hours worked, total compensation and benefits, and an itemized list of deductions must all be included on the statement. The employer must keep these records for a year.

Minimum Pay Period

Employees in New Mexico are required to schedule paydays that are no more than 16 days apart, generally on the 16th and last day of the month. Executives, professionals, managers, outside salespeople, and others, as specified by the federal Fair Labor Standards Act, are exempt. Exceptions may be paid once a month.

Download our free pay period calendar if you need assistance keeping track of pay dates to ensure you stay in compliance.

Payroll Deduction Regulations

Employers in New Mexico may deduct money for cash shortages, damage or loss of company property, uniforms, essential equipment, or other goods required for the job. They may also make deductions for perks or retirement that are allowed by law or that workers have agreed to in writing.

Laws Regarding Final Paychecks

If the salaries are set, you must pay all wages within five days after firing or laying off an employee. You must pay within 10 days if they are based on a job, piece, or commission basis.

Time Off Accrued

Employee vacation benefits, whether paid or unpaid, are not necessary. In addition, unless the time spent counts as overtime, New Mexico does not compel you to give holiday leave or premium pay on holidays. However, if you do so, you must produce a written agreement and stick to it.

HR Laws in New Mexico That Affect Payroll

New Mexico’s labor regulations are straightforward and similar to those in the United States. When the two have different demands, be sure to accommodate them both.

Reporting on New Hires in New Mexico

According to federal law, employers must disclose new hiring or rehires within 20 days. This may be done via the New Mexico New Hire Directory. You’ll need your EIN and contact information, as well as information on the employee, such as their Social Security number and date of hiring. You may submit your application online, by mail to P.O. Box 2999, Mercerville, NJ 08690, or by fax to (888) 878-1614. If you’re sending reports electronically, space them out across two months, no more than 16 days apart. If there have been no new employees since the prior report, there is no need to report.

Sick Leave and Caregiver Leave are both paid.

Employers are not required to give paid sick leave in New Mexico, but they are required to provide unpaid sick leave under the Family and Medical Leave Act or other federal statutes.

If you grant an employee sick leave, The Caregiver Time Act requires you to enable them to utilize that same leave to care for their family members under the same conditions. You can’t fire, threaten to fire, or retaliate against an employee who takes time off.

Voting Is Over

Employees in New Mexico are entitled to two hours of paid time off to vote if their workday starts two hours before voting and concludes fewer than three hours before polls shut. Employers may schedule time off for voting.

Requirements for Lunch and Other Breaks

You are under no obligation to provide lunch or other breaks. You cannot, however, deduct pay for breaks that are less than 30 minutes long. If the employee is free to do anything they want during the break, you don’t have to pay for meals or extended breaks.

Minors in the Workforce

In order to work in New Mexico, children aged 14 and 15 need a work permit. During the school year, they are not permitted to work between the hours of 7 p.m. and 7 a.m. The hours are decreased between 9 p.m. and 7 a.m. outside of the school year. They are not permitted to work during school hours or for more than three hours per day or for more than 18 hours per week. They are not permitted to operate near heavy equipment, explosives, electrical dangers, door-to-door sales, or other activities that are equally hazardous, as defined in New Mexico Statutes Chapter 50, Article 6. Children in film or television projects are exempt.

Forms for Payroll

New Mexico recommends that you pay and submit paperwork on the internet. Although there are multiple broken links on the state website, these forms are available in your district office. They may also be available in fillable PDF format via your payroll program.

W-4 Form for the State of New Mexico

There is no state withholding form in New Mexico. To calculate how much to withhold for each paycheck, utilize the withholding information on the employee’s federal W-4 and the withholding tables for New Mexico.

Other State Payroll and Tax Forms in New Mexico

Federal Forms for Payroll

W-4 Form: Used by businesses to figure out how much tax to withhold from employees’ paychecks.
W-2 Form: This form is used to report total yearly earnings (one per employee)
W-3 Form: Reports all workers’ total pay and taxes.
Form 940: This form is used to report and compute the amount of unemployment taxes owed to the IRS.
Quarterly income and FICA taxes deducted from paychecks are reported on Form 941.
Annual income and FICA taxes deducted from paychecks are reported on Form 944.
1099 Forms: Information on non-employee remuneration that assists the IRS in collecting taxes on contract labor.

For a more detailed discussion of federal forms, check out our guide on federal Forms for Payroll you may need.

Payroll Tax Resources/Sources in New Mexico

Conclusion

New Mexico has fewer labor regulations than many states, but it does charge Income Taxes in Different States and SUTA and requires you to purchase Insurance for Workers’ Compensation. It pays to know the regulations and ensure you adhere to them. You can do this on your own, but a good payroll software like Gusto that tracks New Mexico payroll regulations can make the process easier, plus keep up with changes on tax and SUTA rates. Sign up for a free trial today.