What catches foreign employers off guard in New York is the stack of rules. A worker in New York triggers federal tax obligations, New York State withholding and unemployment insurance accounts, mandatory disability and paid family leave coverage, strict pay-frequency requirements that differ by worker type, and itemized pay statement rules backed by statutory damages.
Each layer has its own agency, its own portal, and its own deadline. Get one wrong and the penalties compound. This guide walks through exactly how New York payroll works mechanically, from first registration through recurring filings, so your team can set it up correctly or audit what's already running.
What this guide covers:
- New York payroll setup: registrations, agencies, and forms
- Employer and employee payroll tax rates and bases (2026)
- New York income tax withholding and brackets
- The recurring payroll filing cycle and annual obligations
- Pay stub requirements under New York Labor Law
- Late-filing penalties and what a payroll audit examines
New York Payroll at a Glance
The table below is a verified quick-reference for 2026. Every rate cited here is sourced and detailed in the sections that follow.
Understanding the total cost of hiring in New York - payroll taxes, mandatory insurance, and statutory benefits combined - matters for accurate headcount budgeting before the first paycheck goes out.
How to Set Up Payroll in New York
- Establish your legal basis for employing in New York. A foreign company must either incorporate or register a US entity (typically a corporation or LLC, qualified to do business in New York through the Secretary of State) or engage an EOR in New York to act as the legal employer. Without a US entity, the foreign parent can't open the tax accounts below.
- Obtain a federal Employer Identification Number (EIN) from the IRS. An EIN (the nine-digit tax ID the IRS assigns to every employing entity) is the first step for every downstream registration. Apply online via the IRS EIN Assistant; foreign-owned entities that can't use the online tool apply on Form SS-4 by fax or mail.
- Register for New York State income tax withholding with the New York Department of Taxation and Finance. Create an account on the NY Business Express portal to get a New York withholding identification number. You'll use this account to remit withheld state income tax and file quarterly reconciliation returns.
- Open a New York unemployment insurance (UI) account with the New York Department of Labor (NYSDOL). Register through NY.gov Employer Registration. New employers are assigned a UI rate of 4.1% (made up of a 3.4% normal rate, a 0.625% subsidiary rate, and a 0.075% Re-employment Services Fund contribution) on the first $17,600 of each employee's wages in 2026. The rate is experience-rated once your claims history builds up.
- Obtain workers' compensation coverage. New York requires coverage from the first employee. Buy a policy through a private carrier or the New York State Insurance Fund (NYSIF), the state's insurer of last resort. Rates vary by occupational class code and are set by the New York Workers' Compensation Board (WCB).
- Set the pay schedule to comply with New York's pay-frequency rules. Under New York Labor Law Section 191, manual workers must be paid weekly, no later than seven days after the end of the workweek in which wages were earned. Clerical and other workers must be paid at least semi-monthly on pre-designated paydays. Executives earning more than $900 per week can be paid at any agreed interval.
- Register for applicable local payroll taxes. New York City and Yonkers impose local income taxes on residents (detailed in Section 9 below). Employers with payroll expense above $312,500 per quarter in the Metropolitan Commuter Transportation District (MCTD) are also liable for the Metropolitan Commuter Transportation Mobility Tax (MCTMT). Register through the NY Department of Taxation and Finance.
- Report new hires to the New York State Department of Taxation and Finance within 20 calendar days of hire using Form IT-2104 or via the New York New Hire Online Reporting Center. Federal law sets the maximum window at 20 days; New York matches that deadline.
- Establish the payment rail. You'll need a US bank account for net pay disbursement and a linked account authorized for EFTPS (Electronic Federal Tax Payment System) for federal tax deposits, plus access to the NY Tax Department's Online Services portal for state remittances.
Employer and Employee Payroll Taxes in New York
New York payroll taxes operate on three levels at the same time: federal (FICA and FUTA), state (UI, disability, paid family leave), and local (NYC and Yonkers income taxes for residents). The variation in payroll tax burdens across jurisdictions globally puts New York's combined rate in a significantly higher tier than most US states, largely because of the local income tax layer.
Employer Taxes and Contributions
Your total burden varies based on three factors. The NYSDOL experience-rating system adjusts the UI rate up or down from the new-employer rate of 4.1% as your claims history builds, so a high-claims employer can reach 9.9%. Workers' compensation rates are set by the Workers' Compensation Board and are tied to occupational class codes, so a tech employer's rate is far lower than a construction employer's.
The MCTMT applies only to employers with payroll above the threshold in the five New York City counties (Zone 1) or seven surrounding counties (Zone 2), adding up to 0.34% on payroll expense in Zone 1.
Employee-Side Taxes and Withholdings
You withhold every item in this table directly from each employee's gross pay and remit the amounts to the relevant agencies on the employee's behalf. The employee never handles these payments directly; they show up as itemized deductions on every pay statement.
What Makes Rates Vary in New York
Two mechanisms cause the biggest rate variation. First, the NYSDOL experience-rated UI system recalculates each employer's normal and subsidiary rates annually based on the ratio of benefits charged to the employer's account against cumulative payroll, meaning a single large layoff can shift the rate from 4.1% toward the upper end of the range for several years.
Second, workers' compensation class codes range from clerical (low) to construction and roofing (very high), and a misclassified employee at the wrong code generates both an audit liability and a premium adjustment. For NYC-based employers above the MCTMT quarterly payroll threshold of $312,500, the MCTMT adds another 0.34% on Zone 1 payroll, an expense line that often surprises foreign employers who budgeted only to the state level.
Income Tax Withholding in New York
How the Withholding System Works
Federal withholding is determined by each employee's Form W-4, which the employee fills out at hire and updates whenever their tax situation changes. New York State withholding is separate: it's governed by Form IT-2104, the *Employee's Withholding Allowance Certificate*, which New York employers must collect independently of the federal W-4.
If an employee provides no IT-2104, you withhold as if the employee claimed zero allowances, typically the highest marginal rate for their wage level.
The federal deposit schedule is determined by your total tax liability during the lookback period (the four quarters ending the preceding June 30). Employers whose lookback-period liability was $50,000 or less are monthly depositors; those above that threshold are semi-weekly depositors.
Monthly depositors remit by the 15th of the following month; semi-weekly depositors remit within three business days of payroll for Wednesday-to-Friday payrolls, and by the following Wednesday for Saturday-to-Tuesday payrolls. Any single-day liability reaching $100,000 triggers a next-business-day deposit obligation regardless of schedule.
New York State withholding is remitted and reconciled quarterly through Form NYS-45, filed electronically via the NY Department of Taxation and Finance's Online Services. Federal payroll records must be kept for at least four years from the due date of the related tax; New York generally mirrors this, and the NYSDOL recommends keeping UI and wage records for at least four years as well.
New York State Income Tax Brackets (2026, Single Filers)
New York State has progressive income tax, with rates revised downward for lower and middle brackets under Chapter 59 of the Laws of 2025, effective for paychecks paid on or after January 1, 2026. The brackets below apply to single filers; married and head-of-household filing statuses have different thresholds but the same rates.
New York State income tax brackets for 2026 run between 3.90% and 10.90%. The 3.90% rate applies to withholding tables used on paychecks (which incorporate standard deductions), while the statutory bracket floor is 4.00% on gross taxable income.
You use the withholding tables in Publication NYS-50-T-NYS (1/26), published by the NY Department of Taxation and Finance, to convert each employee's IT-2104 elections, pay frequency, and wages into a per-period withholding amount rather than the bracket table directly. New York City income tax applies only to residents of New York City and is calculated separately from and in addition to New York State income tax.
Federal income tax withholding follows the IRS Publication 15-T tables based on the employee's W-4 and applies in full to all New York employees.
The Payroll Filing Cycle in New York
The Recurring Payroll Cycle
Each pay period, run this sequence in order:
- Calculate gross pay. Include base salary or hourly wages, overtime at 1.5 times the regular rate for all hours above 40 in a workweek (federal FLSA and New York Labor Law align on this threshold), bonuses, and commissions. Expense reimbursements under a compliant accountable plan aren't wages and aren't taxed.
- Calculate employer taxes per scheme. Apply 6.2% Social Security on wages up to $184,500, 1.45% Medicare on all wages, 4.1% New York UI on the first $17,600, 0.6% FUTA on the first $7,000, and any applicable MCTMT. Stop the Social Security calculation once cumulative wages reach the wage base cap for that employee.
- Withhold employee-side FICA. Match the employer rate exactly: 6.2% Social Security up to $184,500 and 1.45% Medicare on all wages. Start withholding the additional 0.9% Medicare surtax once cumulative wages paid to that employee in the calendar year exceed $200,000, regardless of their household filing status.
- Apply federal and New York income tax withholding. Use the W-4 elections with IRS Publication 15-T tables for federal. Use the IT-2104 elections with Publication NYS-50-T-NYS for New York State. Apply NYC or Yonkers withholding tables if the employee is a resident of those jurisdictions.
- Issue a compliant pay statement. Under NYLL Section 195.3, every pay statement must show: pay period dates; employee name; employer name, address, and phone; rate(s) of pay and basis (hourly, salary, piece, etc.); gross wages; all itemized deductions; allowances claimed as part of minimum wage; and net wages. Hours worked must appear for non-exempt employees paid on an hourly basis.
- Pay the employee on schedule in USD. On the pre-designated payday, consistent with the applicable pay-frequency rule for that employee's worker classification. Final pay upon termination must be delivered by the next regular payday following the last day of work.
- Deposit federal taxes. Remit via EFTPS on your deposit schedule (monthly by the 15th or semi-weekly within three business days). Remit New York State withholding through the NY Tax Department Online Services portal on the schedule assigned during registration (quarterly for most small employers; more frequently as liability grows).
- File quarterly returns. Federal Form 941 is due by the last day of the month following each quarter end (April 30, July 31, October 31, January 31). Form NYS-45, which combines withholding reporting, wage reporting, and UI contributions for New York, is due by the same quarterly deadlines.
- Annual reconciliation. File Form 940 (FUTA annual return) and deliver W-2s to employees and the Social Security Administration by January 31. File Form NYS-45-ATT as the annual reconciliation of New York withholding if required by the NY Tax Department.
Late Filing and Payment Penalties
Penalties add up quickly when deposits or returns are missed. The federal failure-to-deposit (FTD) penalty under IRC Section 6656 is tiered by how many days the deposit is late:
- 1 to 5 days late: 2% of the unpaid deposit
- 6 to 15 days late: 5% of the unpaid deposit
- 16 or more days late, or 10+ days after first IRS notice: 10% of the unpaid deposit
- Not paid within 10 days of IRS demand: 15% of the unpaid deposit
Late filing of Form 941 itself triggers a separate failure-to-file penalty of 5% per month of the unpaid tax shown on the return, capped at 25%. Failure to pay the tax shown on a timely-filed return adds 0.5% per month on the unpaid balance. All three penalties can apply at the same time to the same quarter.
On the New York side, the NYSDOL charges interest on late UI contributions at 12% per year. The NY Department of Taxation and Finance imposes its own late-payment and late-filing penalties on withholding remittances, which compound monthly.
Worker misclassification - treating employees as independent contractors to avoid payroll tax accounts - exposes the employer to back taxes, interest, the full employer and employee FICA shares, statutory penalties from both the IRS and NYSDOL, and potential personal liability for responsible individuals under the IRS Trust Fund Recovery Penalty provisions.
Foreign companies that want to employ New York workers without triggering entity-registration requirements can review hiring options without an entity in New York. An EOR structure eliminates the exposure entirely because the EOR is the employer of record.
Pay Stub Requirements in New York
New York has some of the most specific pay-statement requirements in the United States, codified in New York Labor Law Section 195.3 as amended by the Wage Theft Prevention Act (WTPA). Every employer must furnish an itemized wage statement with every payment of wages, regardless of pay method or frequency.
Required fields on every New York pay statement:
- Pay period dates: The specific dates of the work covered by the payment
- Employee identity: Employee name
- Employer identity: Employer name, address, and phone number
- Rate(s) of pay: The basis (hourly, salary, daily, piece, commission, etc.) and the applicable rate(s)
- Hours worked: Required for non-exempt hourly employees; best practice for all
- Gross wages: Total earnings before deductions
- Itemized deductions: Every deduction listed separately (federal withholding, state withholding, FICA components, PFL, DBL, NYC tax where applicable)
- Allowances: Any allowances claimed as part of the minimum wage (tip or meal credits)
- Net wages: Take-home pay after all deductions
Electronic pay stubs are allowed, but New York requires that employees be able to access and print the statement. Employers can't condition electronic delivery on employee consent if the employee has no practical way to print. Wage notice records under NYLL Section 195.1 - the written pay-rate notice provided at hire and when pay rates change - must be kept by the employer for six years.
Payroll records broadly should be kept for at least four years under federal rules, with New York's NYSDOL recommending the same minimum.
Non-compliance carries real financial exposure. Violations carry penalties of $250 per instance, up to $5,000 per employee. In a class-action scenario involving multiple employees and multiple pay periods, these statutory damages can reach seven figures. Courts have held that missing a single required field - such as omitting the rate-of-pay basis - counts as a violation even when the gross and net figures are correct.
Additional Payroll Obligations in New York
Expense Reimbursements and Allowances
New York doesn't have a statute that explicitly mandates reimbursement of all necessary business expenses for private-sector employees the way California does, but NYLL Section 193 prohibits employers from making deductions from wages for business expenses without explicit written authorization, which creates a strong obligation to reimburse.
Remote-work expenses - internet, phone, home-office equipment - sit in a grey area: NYSDOL guidance hasn't issued a bright-line rule, but failing to reimburse when the expense directly benefits the employer is increasingly scrutinized. Mileage reimbursement at the IRS standard rate (67 cents per mile for 2024; the IRS announces each year's rate in December) is treated as a tax-free reimbursement when the employee documents business purpose.
Reimbursements under a compliant accountable plan are excluded from wages and don't show up as taxable compensation on the pay stub or W-2.
Year-End Payroll Obligations
Year-end closes several filing windows all at once. W-2s must be delivered to employees by 01/31/2026 and filed with the Social Security Administration by 01/31/2026 as well, both federal deadlines apply equally to New York employers. Form 940 (annual FUTA return) is due 01/31/2026. New York withholding is reconciled annually through the year-end portion of Form NYS-45, due by 01/31/2026.
Applicable large employers (ALEs) with 50 or more full-time equivalents must file Forms 1095-C and 1094-C with the IRS by February 28 (paper) or March 31 (electronic) and give the 1095-C to each employee by January 31. Keeping accurate records of employment throughout the year makes year-end reconciliation far easier.
Local and Industry Variations
New York State law preempts municipalities from setting their own general minimum wage rates above the state schedule, so there's no patchwork of city-level minimum wages to track beyond the two-tier state structure (downstate $17.00/hr; upstate $16.00/hr). Two important local income taxes do apply to employees who are residents:
- NYC income tax: 3.078% to 3.876% on NYC taxable income, withheld by the employer for all NYC residents regardless of where they work.
- Yonkers resident surcharge: 16.75% of the employee's New York State income tax, withheld for Yonkers residents.
Industry-specific rules also apply in New York. Prevailing-wage laws under New York Labor Law Article 8 govern public-works contractors and require payroll reporting to the NYSDOL at wage rates set by the Comptroller.
The hospitality industry is subject to spread-of-hours rules that require an additional hour of pay at the minimum wage rate for any shift whose span exceeds 10 hours, an obligation foreign employers managing New York hospitality or food-service staff remotely frequently miss.
For organizations expanding their global workforce strategy, understanding international worker classification across different legal systems helps contextualize why New York's rules around worker status and pay obligations are among the most stringent in the US.
How Borderless AI Runs Payroll in New York
Borderless AI operates as the registered employer through its own US entity, not as a pass-through aggregator.
The platform manages the full New York payroll cycle: gross-to-net calculation at verified 2026 rates and caps, EFTPS federal deposits on the correct schedule, New York UI and withholding remittances filed via NYS-45 by each quarterly deadline, IT-2104-based state withholding at each employee's current elections, and NYLL Section 195.3-compliant pay statements delivered every pay period.
Regulatory monitoring is built into the platform, minimum wage updates, PFL rate adjustments, UI wage base recalculations, and new leave mandates take effect in the system without manual intervention from your payroll team. For companies with their own New York entity that need the filing and compliance layer handled, Global Payroll connects directly to your existing structure.
For companies without a US entity, the Employer of Record service covers the entire employment relationship, entity, registration, payroll, and compliance in a single package. Book a demo to see how Borderless AI handles New York payroll end-to-end, from the first tax calculation to the last filing.
*This guide is for general informational purposes only and does not constitute legal, tax, or payroll advice. Payroll regulations in New York change frequently, rates, thresholds, and filing requirements are updated at least annually. Verify all figures with the relevant authorities or a qualified payroll professional before processing payroll.*
Learn More: New York Hiring Guides
This guide is part of our complete New York hiring series. Learn about the other topics:
