What payroll deductions are employers required to withhold?

Payroll Tax Withholding Requirements in New York

Employers operating in New York must withhold several mandatory payroll deductions from employee wages to ensure compliance with state and federal regulations. Understanding these requirements is essential for accurate payroll processing and reporting.

Mandatory Payroll Deductions

• Federal Income Tax: Employers must withhold federal income tax based on IRS tax tables and employee Form W-4 information.
• Social Security Tax: Withhold 6.2% of wages up to the annual wage base limit for Social Security.
• Medicare Tax: Withhold 1.45% on all wages, with an additional 0.9% Medicare surtax on wages above $200,000 for single filers or $250,000 for married filing jointly.
• New York State Income Tax: Employers must withhold state income tax according to New York tax withholding tables or formulas, based on employee Form IT-2104.
• New York City and Yonkers Income Tax: If the employee works or resides in New York City or Yonkers, employers must withhold local income taxes accordingly.
• New York State Disability Insurance (DBL): While primarily employer-paid, some employers may deduct a portion of DBL premiums from employee wages if authorized.

Additional Operational Considerations

• Unemployment Insurance Contributions: Employers pay New York State Unemployment Insurance (SUI) taxes but do not withhold these from employee wages.
• Recordkeeping and Reporting: Maintain accurate records of all payroll deductions and submit required tax filings to federal and state agencies on time to avoid penalties.
• Employee Classification: Properly classify workers as employees or independent contractors to ensure correct withholding and tax treatment.
• Payroll Automation: Use payroll software or services that integrate New York-specific tax tables and update automatically with tax law changes.

As of 2026, employers should regularly verify withholding rates and tables to stay current with any updates from the IRS and New York State Department of Taxation and Finance.