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Employee Tax Laws and Regulations in New York City

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As a business owner, it is important that you are aware of New York tax laws that may impact your business. For example, those who operate a restaurant may need to ensure that wait staff properly claim tips in their annual income taxes. Those who hire employees on a contractual basis may need to report these hires to the IRS. Here are some of the basic employee tax laws and regulations that every New York employer should understand.

Federal Unemployment Tax  

You may face the federal unemployment tax if you pay $1,500 or more in wages to an employee. Employers should take care to track the wages paid to employees to ensure that they do not forget to file Form 940.

Income Tax Withholding Laws

New York requires that employers withhold state income tax from the wages of employees. New York employers are required to provide these amounts to the Department of Taxation and Finance. If an employer fails to provide these amounts to the Department, then he or she may face charges of tax evasion or fraud.

Payment of Income Taxes

Individuals who reside in New York City will be required to pay several taxes at the local, state and federal level. The tax rate for those who live in New York City is 2.907 to 3.648 percent. An individual may face various taxation rates depending on his or her filing status. New York State also has various income tax percentages that are applicable for a person depending on his or her income level. These tax percentages range from four to eight percent. Those who earn under $16,450 will be required to pay a state tax of 4.5 percent. Those who earn approximately over $2 million a year will be required to pay a state tax of about 8 percent. One’s tax bracket may also vary depending on whether he or she is filing single or jointly within a marriage. New York State has a total of sixteen different tax brackets that may be applicable for a person. 

New York Income Tax Credits

Employees will want to be aware of income tax credits that they can use to reduce their tax liability. Several credits are available to decrease one’s tax liability under New York tax laws. These credits include the NYC Child and Dependent Care Credit, NYC Earned Income Credit, NYC School Tax Credit and NYC Household Credit.

New York employees should be aware of the taxes that they may owe at various levels within the state. Employers also have a responsibility to ensure that they are remitting the appropriate tax amount to the Department of Taxation and Finance. One could face serious criminal and civil penalties for a failure to pay the required taxes or remit the required amounts under the law.


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