Who must withhold personal income tax in New York state? Basically, if you have employees and maintain an office or transact business within New York state, you must withhold personal income tax. But there's a lot more to know.
Out-of-state employers who are not incorporated or licensed under New York state law and do not maintain an office or transact business in New York state are not required to withhold New York state, New York City or Yonkers income taxes on employees who reside in New York state.
However, if an out-of-state employer agrees to withhold New York state, New York City or Yonkers income taxes for the convenience of the employee, then the employer is subject to New York state withholding requirements.
In brief, employers must withhold taxes from all of the following:
- New York state residents earning wages, even wages earned outside of the state.
- New York state nonresidents being paid wages for services performed within the state.
- New York City residents, even when the services are performed outside New York City.
- Yonkers residents, even when the services are performed outside Yonkers.
- Yonkers nonresidents on wages paid for services performed in Yonkers.
An employee claiming he or she is not a New York state, New York City or Yonkers resident must certify that he or she is not a resident and estimate the percentage of wages and other compensation attributable to services in New York state.
Form NYS-1, Return of Tax Withheld, must be filed and the total tax withheld paid after each payroll that caused the total accumulated withholding tax to equal or exceed $700. If you withhold less than $700 during a calendar quarter, remit the taxes withheld with your quarterly return, Form NYS-45, Quarterly Combined Withholding, Wage Reporting and Unemployment Insurance Return.
Form NYS-45, and NYS-45-ATT, Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return - Attachment, must be filed and paid for each calendar quarter. It is due on the last day of the month following the end of the quarter. (For example, the first quarter is due on April 30.)
The New York State Department of Taxation and Finance provides very thorough (i.e., complicated) tables indicating how much is to be withheld per employee based on the employee's wages and number of exemptions claimed. These can be found in publication NYS-50-T-NYS. While the federal government (and many states) requires employers to file an annual reconciliation after year-end, New York however, does not require one.
New York state takes its withholding tax very seriously. To wade through the complications, it may be more efficient to outsource your withholding obligations to a payroll provider. Contact one of our Connected Reps to get started!