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One of the most important parts of managing a business is keeping track of employees’ hours and paychecks. If you are paying your employees in cash, this can be done manually by checking in with each employee or using payroll software to manage it all. However, if you’re an employer who pays workers through checks, then there’s typically more paperwork involved when processing timesheets and calculating payroll taxes.
Payroll processing in New York might be more time consuming and expensive than in other states. Its minimum wage is rapidly rising, and you may soon be compelled to pay workers a minimum salary of $15 per hour, more than double the federal minimum. You must withhold federal, state, and local income taxes from employee paychecks in addition to paying ordinary federal payroll taxes, unemployment insurance, and perhaps the Metropolitan Commuter Transportation Mobility Tax.
Because New York is a progressive state, you’ll immediately notice that payroll requirements change often, making it difficult to keep up without payroll software.
How to Do Payroll in New York
The fundamental processes and precise instructions for doing payroll in New York are outlined below. If you had more than $100,000 in payroll taxes withheld in the previous year, the state will enroll you in the PrompTax program and provide you with a six-digit number to file online. This number will be required if you utilize a payroll service.
Step 1: Establish your company as an employer: You’ll need your Employer Identification Number (EIN) and an account with the Electronic Federal Tax Payment System (EFTPS) at the federal level (EFTPS).
Step 2: Register with the New York State Department of Motor Vehicles: You must register for unemployment insurance (UI), wage reporting, and withholding tax with NYBE if you are a new company or home employer. Visit the New York Department of Labor’s website to register an agricultural company, a nonprofit organization, or an Indian tribe.
Use your Federal EIN followed by a location code instead of your New York State Identification Number for state income tax withholding (if applicable to your business). You will be issued a unique UI employer registration number.
To file electronically, create an account with online services.
Step 3: Create a payroll system: Keep in mind that there are other taxes to consider, such as the reemployment tax and state disability insurance.
Step 4: Collect employee payroll forms: Collecting employee payroll forms is easier if done during onboarding. W-4, I-9, and Direct Deposit information are among the forms. Form IT-2104, the NY State Withholding Allowances Certificate, is also required of employees.
step 5: Because of the complexity of NYC tax law, mistakes might cost you money, so double-check your time sheets.
Step 6: Work out your payroll and pay your employees: If you don’t have a legitimate company location in their state, don’t forget to compute withholdings for non-residents.
Step 7: File with the federal and state governments for payroll taxes: Depending on the filer type, you must pay withholdings within three or five days of exceeding $700. Many firms, however, find it more convenient to pay this with each paycheck.
For federal taxes, including unemployment, follow the IRS’s guidelines. On the New York Tax Department’s website, withholding, wage reporting, and UI reports must be submitted online, and amounts outstanding must be paid by ACH debit.
After each paycheck, the NYS-1 and your withholding payments are normally submitted. You may use the NYS-45 to remit payment if your withholdings are less than $700 for a calendar quarter.
The NYS-45 and MTA-35 tax forms are filed quarterly in New York.
If any of these days happen on a Saturday or Sunday, you may file the next business day.
Withholdings for New York State Income Taxes:
Determine how much you should withhold in income taxes from each employee’s paycheck each period using the withholding allowance from the employee’s Form IT-210. Use 0 as the number of allowances if the employee did not submit one.
- New York State Withholding Tax Tables and Methods, NYS-50-T-NYS
- New York City Withholding Tax Tables and Methods (NYS-50-T-NYC)
- Yonkers Withholding Tax Tables and Methods (NYS-50-T-Y)
- Unemployment Taxes: The state will mail you your UI tax rate for the year when you register your firm and apply for an EIN. If you don’t get it, you may be able to find it on your Business Express or Department of Labor (DOL) accounts. Between the hours of 8 a.m. and 5 p.m. Monday through Friday, you may contact the employer hotline at 888-899-8810. SUTA is paid quarterly and is noted on the NYS-45.
- Taxes levied by the Metropolitan Commuter Transportation Mobility Tax (MCTM) include: Each calendar quarter, they are due. The MCTM is calculated by multiplying your payroll expenditure for all covered workers for each calendar quarter by the MCTMT rate from the table below. Fill out Form MTA-305 online or by mail using your online services account. These must be paid in a timely manner.
Step 8: Keep track of your payroll data by documenting and archiving them: It’s crucial to retain records for all workers, even those who have been fired, for many years. In this post on preserving payroll records, you may learn more about recordkeeping obligations.
All employment tax records must be kept for at least four years in New York. You must maintain all records of these tax filing reports and information returns accessible for examination by the New York Tax Department if you withhold state and city taxes.
Step 9: Finish your payroll tax reports for the year. W-2 (for workers) and 1099 (for non-employees) are the government forms (for contractors.) These must be obtained by employees and contractors by January 31 of the following year. You are not required to submit W-2s or 1099s with the state of New York.
Payroll Laws, Taxes, and Regulations in New York
Unlike several states, New York does not have a regular tax withholding payment schedule, such as semi-monthly or quarterly. If you were obligated to pay three or five days after your total withholdings exceeded $700, instead:
- If your withholdings in the calendar year prior to the previous calendar year exceeded $15,000, you have three days to file.
- If your withholdings in the calendar year prior to the previous calendar year were less than $15,000, you have five days.
Changes will be communicated to you by the state, and new firms will have five days to file after being alerted by the New York Tax Department.
Taxes in New York
State and municipal taxes, as well as state unemployment taxes (SUTA) and the Metropolitan Commuter Transportation Mobility (MCTM) Tax, are all levied in New York. Paid parental leave, sick leave, workers’ compensation, and state disability insurance are also your responsibilities. You must pay federal FICA taxes (Social Security and Medicare) and withhold a corresponding amount from your workers’ paychecks at the federal level. You and your workers will each contribute 6.2 percent to the Social Security Fund and 1.45 percent to the Medicare Fund.
Most companies must submit it online on the site; if you choose to send in a physical copy, you may be penalized.
Unemployment Insurance Taxes in New York State (SUTA)
Agricultural companies and farm crew leaders must give unemployment insurance coverage to their workers beginning January 1, 2020, if certain requirements are met. Exemptions apply to H-2A international guest workers.
On the first $11,800 of an employee’s salary, New York levies state unemployment insurance taxes (SUTA) ranging from 2.25 percent to 9.825 percent. It also levies a 0.075 percent reemployment tax on the first $11,800 of an employee’s earnings.
Please note that SUTA (and FUTA) must be paid from corporate money; the expense should not be passed on to workers.
All workers must be taxed, with the exception of the following:
- Members of a Limited Liability Company (LLC), Limited Liability Investment Company (LLIC), or Limited Liability Trust Company (LLTC)
- If their job is ancillary to their course of study, students are in regular attendance at the educational institution that employs them.
- If the employee is informed at the time of employment that the student is enrolled in a financial aid program, the student’s spouse may be employed by the student’s educational institution.
- Students participating in specific work-study programs at nonprofit or public educational institutions
- Students enrolled full-time at a college or university who work at a summer camp
- A sole owner, their spouse, or a kid under the age of 21 are all eligible.
- Those whose jobs are covered by the Federal Railroad Unemployment Insurance Act
- Under some circumstances, freelance shorthand reporters
- Under some circumstances, licensed real estate agents or sales associates
- Under some circumstances, licensed insurance agents or brokers
- Some workers of religious and charity organizations
- Clergy and religious institutions
Please keep in mind that, although it may be unique for certain firms, you must obtain unemployment insurance for delivery drivers, traveling salespeople under certain situations, musicians and other entertainers, professional models, and fellow, resident, and intern doctors. The New York State Construction Industry Fair Pay Act covers the majority of construction employees.
You must also pay federal unemployment taxes in addition to state unemployment taxes in New York. On the first $7,000 of each employee’s taxable earnings, the standard rate is 6%. The highest tax per employee is $420 ($7,000 multiplied by 6%).
You may be eligible for a 5.4 percent reduction on your federal unemployment insurance taxes if you pay SUTA (FUTA). This will reduce your FUTA tax rate from 6% to 0.6 percent.
Recently in the news:
State withholding allowances should no longer be reported on the IRS Form W-4 beginning in 2020. Instead, provide workers with a copy of Form IT-2104, Employee’s Withholding Allowance Certificate, to sign and submit. However, federal tax allowances must still be reported on Form W-4, so have a copy of each on hand for workers to sign and submit at onboarding.
When it comes to qualified work, liable employers, and computing gross pay, New York follows the same procedures for income tax withholdings as it does for SUTA. You even use the same form, the NYS-45, to submit according to the same timetable.
You must comply with all withholding obligations if you are an out-of-state employer withholding taxes for an in-state employee. In general, New York adopts the same principles for determining taxable income as the federal government. To calculate withholdings, you’ll utilize the information on Form IT-2104 and the New York tax tables, which are revised each year.
Taxes in New York City and Yonkers
Employees in New York City and Yonkers are taxed as well. You may search up an employee’s address to determine whether they are deemed to be dwelling in NYC or Yonkers if you are unsure whether or not they are considered to be residents in a given jurisdiction.
Non-resident workers are required to pay taxes on occasion. Unless you have a legitimate office in their state, you must withhold New York state and local taxes from workers who do not reside in New York but received money from work done in New York. Form IT-2104.1 is used by these workers to calculate withholdings. Visit the New York State government website to learn more about residency vs. non-resident tax obligations.
Insurance for Workers’ Compensation
If your business is located in New York, you must acquire workers’ compensation insurance. On average, this costs $1.41 every $100 in salaries paid, however, this might vary greatly depending on the industry in which your company operates.
Mobility Tax for Commuters in the Metropolitan Area (MCTMT)
You are responsible for the MCTMT for a calendar quarter if you have payroll costs inside the Metropolitan Commuter Transportation District (MCTD).
- New York State income tax is needed to be withheld.
- For that calendar quarter, your payroll expenditure for all covered workers exceeds $312,500.
Confirm that your company is situated in one of the following locations (inside the MCTD) to verify whether the MCTMT tax applies to you:
- Manhattan, Bronx, Kings (Brooklyn), Queens, and Richmond are all part of New York City (Staten Island)
- Rockland County
- Nassau County
- Suffolk County
- Orange County
- Putnam County
- Dutchess County
- Westchester County
If you live in one of the regions listed above, look up your MCTMT tax rate in the table below.
New York’s Minimum Wage Laws
Recently in the news:
All firms in New York subject to state minimum wage rules must pay their workers a minimum of $12.50 per hour by December 2020. Employers that refuse to comply face fines of up to 200 percent of overdue payments. Future hikes will be announced on or before Oct. 1, so be sure to monitor the New York State government website on a regular basis.
New York is gradually raising the minimum wage to $15 per hour, with tipped pay being paid at $10 per hour. The current rates are determined by the city in where your company is located. Employers in New York City, Long Island, and Winchester must pay $15 per hour. Local wages in the rest of New York will continue to rise each year until they reach $15 per hour. Every October 1st, the Commissioner of Labor will report yearly increases for the remainder of the state until the state’s minimum wage of $15 per hour is met.
The following are exempt from the minimum wage:
- Administrators and executives
- A few professionals
- Salespeople that work outside the company
- Drivers of taxicabs
- Babysitters on a part-time basis
- Ministers and religious order members
- Volunteers, students, apprentices, and learners who work in nonprofit organizations
- Students who are gaining work experience
Please note: When you hire a new employee and determine their pay rate, you must give them a written pay notice that includes the amount (hourly, salary, commission, etc.) as well as the schedule on which they’ll be paid, their designated payday or pay date, the address and phone number of your business location, and any deductions you may make for tips, meals, or lodging.
Overtime Regulations in New York
New York follows federal overtime exemption regulations, with any hours worked above 40 in a workweek being paid at 1.5 times normal salary. It establishes the following norms for everyone else:
Employees Can Be Paid in a Variety of Ways
Employees may be paid through direct deposit, paper check, cash, or payroll card, among other options. You can’t hire someone based on whether or not they agree to be paid by direct deposit or payroll card in New York since some workers don’t have bank accounts, and any policy that targets them would be discriminatory.
Pay Stub Regulations
When you conduct payroll for your workers, you’ll need to create a pay statement, also known as a pay stub, so that they can keep track of their wages. Although it is not required by federal law, it is required by New York State. Basic information should be included, such as:
- Your firm’s name
- The name of the employee
- Pay rate
- Covered pay period
- Working hours
- Pay for overtime
Minimum Pay Period
In New York, if you hire manual workers, you must pay them at least once a week. If you want to process their paycheck less often, you must first get approval. You can pay all other workers at least weekly, bimonthly, or semimonthly. The law does not specify how frequently you must pay your employees; it merely requires that you do it regularly.
Payroll Deduction Regulations
Although some states are tolerant of payroll deductions as long as they do not reduce an employee’s compensation below the federal minimum wage, New York has very tough requirements. You may not remove money from an employee’s paycheck for the following reasons:
- Money shortages
- Shortages in inventory
- Damage to or loss of property
- Uniforms that you’ll need
- For the work, you’ll need the following tools and equipment.
You may only deduct money from an employee’s paycheck if it’s allowed on both a federal and state level, and if the employee gives you permission.
Please remember that you must get permission in writing or face repercussions. Insurance premiums, healthcare contributions, charitable donations, return of salary advances, reimbursement of earlier overpayments, and so on are some of the most typical deductions requested by workers.
Laws Regarding Final Paychecks
If you ever have to fire an employee in New York, you should give their last salary as soon as possible. Legally, you have until the next payment following the termination date to disburse without risking legal repercussions. If you manage their benefits, you must inform them of the precise day their benefits will be ended within five days of their termination date.
Even if an employee leaves, you should make every effort to pay them on their next normal payday. However, there are no particular rules limiting this in New York.
Paid Time Off (PTO)
There are no strict requirements in either federal or state law about how you should manage paid time off (PTO). You have the option of paying it out or taking it back when an employee departs your firm. The exception to this rule is that your method must be specified in a policy that the employee gets upon employment. If you don’t establish ground rules for how you’ll manage earned vacation time, you’ll be forced to pay it out if they have a balance when they leave the firm.
HR Laws in New York That Affect Payroll
Reporting on New Hires in New York
You must notify the state when you hire a new employee, ideally before you process their first paycheck. The new hire report must be submitted within 20 days of their employment date in New York. If you fail to do so, you might face a punishment of $20 per employee or $450 if you conspired with the employee to keep the information hidden. To report the information online, use Form NYS-209.
Requirements for Lunch and Other Breaks
Employees working shifts of more than six hours that begin before 11 a.m. and end at 2 p.m. must have a 30-minute uninterrupted lunch break between those times. It is not necessary for this to be a paid break. There are no additional break requirements, however, if you give breaks lasting up to 20 minutes, they must be compensated as work time. You’ll need to use a timesheet or a time clock to verify that their work and break hours are correctly logged.
Employers in New York must provide workers with up to 12 weeks of paid family leave starting in January 2021—federal law permits such leave but does not require it to be paid in its entirety.
Leave and Vacation
Vacation and holiday PTO is not regulated in New York. Employers have complete control over these regulations. Just keep in mind that if you say you’ll grant a particular amount of PTO hours each year, you’re legally bound to follow through.
Leave of Absence
According to New York labor law, you must give sick leave to your employees.
- If you have four or fewer workers in a calendar year, you must give each one up to 40 hours of unpaid sick leave, and if your previous tax year’s revenue was above $1 million, you must offer 40 hours of paid sick leave.
- If you have 5 to 99 workers in a calendar year, you must provide each of them up to 40 hours of paid sick leave.
- If you have more than 100 workers in a calendar year, you must offer each one up to 56 hours of paid sick leave.
It’s critical to keep track of each employee’s leave, particularly sick leave, so you can demonstrate compliance in the case of an audit. It will also make managing the employee’s earned sick time easier for you, allowing you to better predict the timing of any future costs.
Paid family leave
Paid family leave is time spent bonding with a baby, caring for a close relative with a severe illness, or assisting while a family member is deployed in the military. If you have more than one employee, you must have a paid family leave policy in place. After 26 weeks of continuous employment, full-time workers (working at least 20 hours per week) are eligible. Part-time workers become eligible after 175 days, which do not have to be consecutive.
Disability Insurance Provided by the State
You must offer temporary disability insurance if one or more workers are employed for at least 30 days in a calendar year. This may be done with private coverage or via the state insurance fund.
Unlike certain payroll charges (such as FUTA), New York permits employers and workers to split the cost of disability insurance. If you don’t want your company to bear the whole expense, you may take 12 percent of an employee’s pay up to a maximum of $60 each week. Simply take money from their paychecks on a regular basis, and you’ll have the money when it’s time to pay the debt.
Child labor is illegal in the United States.
In New York, there are restrictions controlling how children may be employed. A minor is defined as someone under the age of 18, however, the restrictions vary depending on the age range.
When conducting business in New York, you should be aware of the following state-specific child labor laws:
- Working documents are required for children aged 14 to 17 to work in New York.
- During school hours, children aged 14 and 15 are not permitted to work.
- Minors are not permitted to work in factories.
- If they are not in school, minors aged 16 and 17 may work full-time.
Forms for Payroll
For computing state income tax withholdings and mitting additional taxes, New York has its own form. It does, however, utilize the same form for submitting withholdings and SUTA.
IT-2104 New York Form
Employee’s Withholding Allowance Certificate, Form IT-2104, is used in New York. It, like the IRS Form W-4, determines income tax withholdings based on your employee’s preferences. This may be used to figure out withholdings for New York state taxes, which are different from federal withholdings. This is something that every employee should do. Exemption requests for Native Americans, military personnel, participants in the START-UP NY program, and others are handled differently on the form. Make sure your HR staff is informed of them so that eligible workers may take advantage of them.
Other Withholding Forms in New York
- Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return-Attachment (Form NYS-45-ATT): You must complete this form in its entirety each quarter.
- Employer’s Quarterly Metropolitan Commuter Transportation Mobility Tax Return (Form MTA-305): If you’re submitting MCTM taxes, you’ll need to do this.
- Employer Registration for Unemployment Insurance, Withholding, and Wage Reporting in New York State (NYS-100): Agricultural laborers, government institutions, Indian tribes, and NGOs all have their own forms.
- Instructions for Electronic Media Reporting of Employees Hired or Rehired, Form NYS-209
Forms for Federal 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 record total yearly earnings (one per employee)
- W-3 Form: This form is used to record all workers’ total earnings and taxes.
- Form 940 is used to submit and compute unpaid unemployment taxes to the Internal Revenue Service (IRS).
- To submit quarterly income and FICA taxes deducted from paychecks, use Form 941.
- To report yearly income and FICA taxes deducted from paychecks, use Form 944.
- 1099 Forms: Used to report non-employee compensation and assist the IRS in collecting taxes on contract labor.
Payroll Tax Resources and Sources in New York
Unemployment Insurance, Wage Reporting, and Withholding Tax for Employers: This brochure covers almost all you need to know about your payroll, withholdings, and unemployment insurance rights, duties, and filing requirements.
The website of the New York Business Express (NYBE) is where you may register as a new employer. Inquire about licenses, laws, incentives, and other business requirements.
Department of Taxation and Finance: The website offers many sections where you may obtain information on every area of taxes, including demo films, articles, and forms.
Conclusion
Because of the intricacy of the taxes in New York, there is a lot to consider while conducting payroll. It has state income taxes as well as SUTA, as well as certain municipal income taxes. Even non-resident workers are required to pay taxes, therefore withholdings must be calculated differently depending on where employees live and where your firm is situated.
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