The Complete Guide To New York Payroll & Payroll Taxes

New York payroll can be complicated because employers may need to handle federal payroll taxes, New York state income tax withholding, unemployment insurance, and local payroll-related taxes for New York City or Yonkers employees.

New York employers also need to follow state labor rules for minimum wage, overtime, paid sick leave, new-hire reporting, pay frequency, and payroll recordkeeping.

This guide breaks down the New York payroll taxes and labor laws small business owners need to know.

State & Local Payroll Taxes In New York

New York payroll taxes can include state income tax withholding, New York City income tax withholding, Yonkers resident or nonresident withholding, and state unemployment insurance tax. Employers must also handle federal payroll taxes, including federal income tax withholding, FICA, and FUTA.

New York businesses may also be responsible for other taxes, such as sales tax, use tax, or property tax, but those are separate from payroll taxes.

New York Payroll Tax Exclusions & Exemptions

Some New York workers or wages may qualify for special payroll tax treatment, depending on the worker’s classification, income tax status, residency, or employment type.

Employees who qualify for exemption from New York State, New York City, or Yonkers withholding can submit Form IT-2104-E. To qualify, employees generally must be under 18, over 65, or a full-time student under 25, and must have had no New York income tax liability in the previous year while expecting none in the current year.

Some employment types may also be excluded from New York unemployment insurance coverage, depending on the facts. Examples can include certain family employment for sole proprietors, federal railroad employment, and other narrow categories.

Independent contractors are treated differently from employees. Businesses generally do not withhold payroll taxes for properly classified contractors, but contractors are still responsible for their own income and self-employment taxes.

Businesses participating in START-UP NY may also have eligible employees whose wages qualify for a New York income tax wage exclusion. However, employers generally must still withhold New York income taxes unless the employee provides the proper START-UP NY exemption certificate.

New York Labor Laws & Other HR Requirements

In addition to payroll taxes, New York employers must comply with state and local labor laws governing minimum wage, wage notices, new-hire reporting, sick leave, paid family leave, meal breaks, child labor, pay frequency, disability benefits, and workers’ compensation.

How To Calculate & Process New York Payroll

Once you understand New York’s payroll taxes and labor rules, running payroll comes down to registering your business, collecting the right employee forms, calculating pay, withholding taxes, paying employees, and keeping accurate records.

Step 1: Register Your Business

Before running payroll in New York, make sure your business is registered for the proper employer accounts. New York employers may need to register for withholding tax, unemployment insurance, and wage reporting.

You should also confirm whether your business is subject to additional payroll-related taxes, such as the Metropolitan Commuter Transportation Mobility Tax.

Step 2: Gather Employee Payroll Documents

Before paying employees, collect the forms and information needed to calculate payroll correctly, including:

• Form W-4 for federal income tax withholding
• Form IT-2104 for New York State, New York City, and Yonkers withholding
• Form I-9 for employment eligibility verification
• Direct deposit information, if applicable
• Pay rate, pay schedule, employee classification, and deduction information

Step 3: Calculate Gross Pay

Calculate each employee’s gross pay based on their pay type. For hourly employees, multiply hours worked by the hourly rate and include overtime when required. For salaried employees, divide the annual salary by the number of pay periods.

Include bonuses, commissions, tips, PTO, sick leave, reimbursements, and other taxable compensation when applicable.

Small business payroll software can make this easier.

Step 4: Calculate Taxes & Deductions

New York employers must withhold federal income tax based on each employee’s Form W-4. Employers must also withhold New York State income tax and, when applicable, New York City or Yonkers tax based on Form IT-2104 and current withholding tables.

Employers and employees also pay FICA taxes. For 2026, Social Security tax is 6.2% for both employer and employee up to the $184,500 wage base. Medicare tax is 1.45% for both employer and employee, with no wage cap. Employers must also withhold the 0.9% Additional Medicare Tax from employee wages over $200,000.

Employers, not employees, pay FUTA and New York unemployment insurance. New York’s 2026 unemployment insurance total employer contribution rates range from 1.7% to 9.5%, including the reemployment services fund rate. The 2026 new employer total rate is 4.1%.

Finally, subtract any required or employee-authorized deductions, such as benefits contributions, retirement contributions, wage garnishments, child support, New York disability benefits contributions, or Paid Family Leave contributions.

Step 5: Pay Employees

After calculating gross pay, taxes, deductions, and net pay, pay employees using an allowed payment method, such as direct deposit, paper check, or another approved method.

New York pay frequency rules depend on employee type. Manual workers are generally paid weekly, clerical and other workers at least twice per month, and commission salespeople at least once per month.

Step 6: File Reports & Keep Payroll Records

New York liable employers generally file Form NYS-45, the Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return. This form combines withholding, wage reporting, and unemployment insurance reporting.

Keep payroll records organized and secure, including employee names, Social Security numbers, addresses, pay rates, hours worked, pay periods, payment dates, deductions, and tax records.

The IRS generally requires employment tax records to be kept for at least four years. FLSA payroll records should generally be kept for at least three years, while wage calculation records, such as timecards and work schedules, should generally be kept for at least two years.

New York State Payroll Tax & Business Resources

New York payroll has a lot of moving parts, from income tax withholding and unemployment insurance to wage reporting, labor laws, paid leave, and required insurance coverage.

For official guidance, use the New York Department of Taxation and Finance for withholding tax, NYS-45 filing, New York City and Yonkers withholding, and MCTMT rules. Use the New York Department of Labor for unemployment insurance, wage reporting, minimum wage, pay frequency, child labor, and workplace posting requirements. The New York Workers’ Compensation Board is the best source for workers’ compensation, disability benefits, and Paid Family Leave requirements.

For federal payroll rules, use the IRS for federal withholding, FICA, FUTA, and employer tax filing guidance, and the U.S. Department of Labor for FLSA wage, overtime, and recordkeeping requirements.