New York State Tax

Employment Taxes in New York

Any responsible employer should know and understand any applicable payroll taxes they must withhold on behalf of the employee or pay for the employer. When calculating the employee's federal, state and local withholdings, it is important to use accurate rates. If the employer withholds too much, the employee will not have access to money that is rightfully theirs until they receive a tax refund. If the employer withholds too little, the employee may be faced with a large, unexpected tax bill at the end of the year. When remitting the employer's portion of taxes owed, incorrect calculations could result in significant fines and penalties. An employer should also understand how often they are required to remit payments to the applicable taxing authorities.

The majority of payments that the employer will make will be composed of the employee's withholdings for federal, state and local taxes. However, they will also need to pay the employer portion of social security, Medicare and unemployment taxes.

In the state of New York, unemployment tax, also referred to as unemployment insurance or UI, is a tax that each eligible employer must pay into the state's general unemployment fund. All unemployment payments made to New York residents are paid from this fund. UI taxes are payable on the first $8,500 of compensation to each employee during the calendar year, even if the business utilizes a different fiscal year. The rate is determined on an employer by employer basis and ranges from 1.425% to 9.825%. The rate is determined by an employer's experience rating. The experience rating is simply the employer's employment and unemployment history. This means that an employer with a low turnover rate and few unemployment claims will have a lower UI rate. During 2011, a new employer with no prior history was automatically assigned a rate of 4.025%. The state determines that rate and mails them to each employer during March. Once the rate is set, it cannot be changed except in the case of fraud or a significant change in the experience rating.

All employers are also required to pay a tax into the re-employment services fund. This is a fund designed to provide support and training for the unemployed in order to get them back in the work force. The RSF tax is a flat tax of 0.075% on the total quarterly payroll. There is no adjustment for a high or low experience rating. There is also no earnings cap for the taxable wages.

A qualified accountant can help a business to design and implement proper payroll systems that can simplify the tax paying process. A CPA is also a good resource if one has questions about the application of the tax code for their specific situation. Understanding the employment taxes up-front can help a business avoid common pitfalls and the associated additional expenses.

Businesses in New York may find the following to be of interest: