Complete Guide to Payroll Taxes and Deductions in New York City

Managing payroll in New York City can be challenging for business owners and HR departments alike. Payroll involves not only issuing paychecks but also ensuring that all federal, state, and local taxes are withheld correctly, employer contributions are paid on time, and regulatory compliance is maintained. Mistakes in payroll can lead to fines, penalties, or legal issues, so it’s critical to understand how payroll works in NYC.

At Element Accounting LLC, we help NYC businesses navigate the complexities of payroll, making sure employees are paid accurately, taxes are filed properly, and all obligations—like Paid Family Leave (PFL) and Workers’ Compensation (WC)—are met efficiently.

Why Payroll Services Are Essential

Payroll management is more than just issuing paychecks. A proper payroll system ensures:

Employees receive their accurate net pay, which improves satisfaction and reduces disputes.
New York payroll taxes are withheld and remitted correctly, preventing penalties and audits.
Employer contributions—including FUTA, SUI, RSF, and WC—are calculated accurately.
Compliance with state laws like Paid Family Leave (PFL) and safety regulations through Workers’ Compensation is maintained.

For businesses in NYC, it’s important to understand whether payroll taxes are due monthly or quarterly, as the schedule depends on the size of the business, total payroll, and specific tax type. Paying taxes late or incorrectly can result in fines, interest, and additional scrutiny from state agencies.

Employee Payroll Deductions in NYC

Employees in New York City have several mandatory deductions that are withheld from their paychecks. These deductions ensure that both federal and state obligations are met:

Federal Income Tax: Calculated based on the employee’s W-4 form. Employers are responsible for withholding the correct amount and remitting it to the IRS.
Social Security and Medicare (FICA): Social Security is 6.2% of wages, and Medicare is 1.45%, both withheld from employee paychecks and matched by the employer.
New York State Income Tax: Progressive tax withheld through payroll, based on income levels.
NYC Income Tax: Local tax for residents, collected alongside state income tax.
Paid Family Leave (PFL): A small contribution (approximately 0.373% of wages) that funds employee-paid family leave benefits.

FAQ: “If my employer does not withhold NYC or NY State tax, do I still owe it?”
Yes. Employees remain responsible for filing and paying any due taxes. Failure to withhold taxes may also expose the employer to penalties.

Correct payroll deductions ensure employees are paid accurately, reduce the risk of compliance issues, and help maintain trust between employer and employee.

Employer Payroll Contributions

Employers are required to contribute to several payroll-related obligations beyond the deductions withheld from employees:

Employer portion of Social Security and Medicare (FICA): Matches the employee portion (6.2% + 1.45%).
Federal Unemployment Tax (FUTA): 0.6% on the first $7,000 of wages; helps fund unemployment benefits.
New York State Unemployment Insurance (SUI): Paid on the first $12,000 of wages; rate depends on the employer’s history and industry.
NY Reemployment Service Fund (RSF): Small tax to support workforce development services.
Workers’ Compensation (WC) Insurance: Covers medical costs and wage replacement for employees injured on the job. Paid entirely by the employer, typically directly to a licensed insurance company.

FAQ: “Do I have to register with a Workers’ Compensation insurer?”
Yes. All New York employers with employees must have a WC policy. Registration is typically done through a licensed insurance company, which issues a certificate of coverage.

FAQ: “What about Paid Family Leave (PFL)?”
While employees fund PFL via payroll, the employer is responsible for withholding contributions and remitting them to a licensed insurance company. PFL is mandatory for all employees in New York State.

Payroll Taxes: Monthly or Quarterly?

Many business owners ask whether payroll taxes should be paid monthly or quarterly. The answer depends on the total annual tax liability and the type of tax:

Federal payroll taxes (Income Tax, Social Security, Medicare):
- Monthly Schedule Depositor: total tax liability ≤ $50,000 in the lookback period. Taxes are deposited once per month, by the 15th of the following month, regardless of whether payroll is weekly, bi-weekly, or semi-monthly.
- Semiweekly Schedule Depositor: total tax liability > $50,000. Taxes must be deposited twice per week, depending on the day of payroll. Each payroll cycle is reported separately.
New York State Income Tax / NYC Income Tax:
- Small payrolls: quarterly via NYS-45.
- Large payrolls: monthly payments required.
SUI and RSF: usually quarterly, but monthly for larger payrolls.
FUTA: annual if liability < $500; otherwise quarterly.
PFL: always monthly.
Workers’ Compensation: typically annual, but some insurers allow monthly installments.

FAQ: “How do I pay taxes if my salary changes from $18,000 to $72,000?”
A larger payroll may require monthly payments for some taxes to remain compliant and avoid penalties.

Paid Family Leave (PFL) Explained

Paid Family Leave in New York State provides eligible employees with:

Up to 12 weeks of paid leave per year.
67% of average weekly wages, capped (for example, $1,700/week in 2025).

FAQ: “If I earn $2,000/week, how much will PFL pay me?”
67% × $2,000 = $1,340/week (maximum $1,700/week).

Eligible reasons include:

Bonding with a newborn, adopted, or foster child.
Caring for a family member with a serious health condition.
Assisting a family member on active military duty.

FAQ: “Can I take a year off after giving birth?”
PFL only covers 12 weeks of paid leave. Additional unpaid leave may be available via FMLA for employees of companies with ≥50 employees.

Workers’ Compensation (WC) Insurance

Mandatory for all employers with employees in New York.
Covers medical costs and lost wages for work-related injuries.
Paid entirely by the employer, usually directly to a licensed insurance company.
Employers must maintain certificates of coverage and comply with reporting requirements.
Noncompliance penalties: fines of $2,500–$10,000, potential civil liability for employee injuries, and possible business closure until insurance is obtained.

Disability Benefits Law (DBL) in New York

Disability Benefits Law (DBL) in New York

Disability Benefits (DBL) provide employees with partial wage replacement when they are unable to work due to non-work-related illness or injury, including pregnancy and recovery.

Key points:

Provides up to 26 weeks of benefits within a 52-week period.
Benefit amount: 50% of the employee’s average weekly wage, capped at $170/week.
Waiting period: Benefits usually begin after 7 consecutive days of disability.
DBL is separate from Workers’ Compensation and applies only to off-the-job conditions.

FAQ: “If I earn $1,000/week, how much will DBL pay me?”
50% × $1,000 = $500/week, but capped at $170/week.

Who is eligible?

Most private-sector employees working in New York for 4+ consecutive weeks.
Part-time employees may qualify after 25 working days.

Who pays for DBL?

Employers are required to provide coverage through an insurance carrier.
Employers may deduct up to 0.5% of wages, not exceeding $0.60/week, from employees to offset costs.
The majority of the premium is typically employer-paid.

Penalties for noncompliance:

Failure to provide DBL coverage can result in fines of $100–$500 per employee, additional penalties for continued noncompliance, and employer liability for unpaid benefits.

Metropolitan Commuter Transportation Mobility Tax (MCTMT)

The Metropolitan Commuter Transportation Mobility Tax (MCTMT) is a regional payroll tax that applies to employers operating within the Metropolitan Commuter Transportation District (MCTD), which includes all five boroughs of New York City and several surrounding counties.

Funds collected from this tax support public transportation infrastructure, including the MTA subway and bus system. Employers are responsible for paying the MCTMT based on their total payroll expenses in a quarter. The tax is not withheld from employees’ wages and only applies if quarterly payroll exceeds a minimum threshold.

Summary Table: Payroll Taxes and Contributions in NYC

Tax / Contribution	Who Pays	Where to Pay	Reporting	Frequency	Payment Deadline / Notes
Federal Income Tax	Employee	IRS	Form 941, W-2	Quarterly / Annual	Monthly deposit allowed if total tax ≤ $50,000 (lookback period); semiweekly if > $50,000; W-2 by Jan 31
Social Security (6.2%)	Employee & Employer	IRS (FICA)	Form 941 + W-2	Quarterly / Annual	Monthly deposit allowed for monthly schedule depositors; semiweekly for high liability; bi-monthly payroll combined into one deposit for monthly depositors
Medicare (1.45%)	Employee & Employer	IRS (FICA)	Form 941 + W-2	Quarterly / Annual	Same as Social Security
FUTA (0.6%)	Employer	IRS	Form 940	Annual	Jan 31; quarterly allowed if liability > $500
NY State Income Tax	Employee	NY State Dept. of Taxation	NYS-45 (quarterly), Annual Reconciliation	Quarterly / Annual	Last day of month after quarter; monthly allowed for larger payrolls; Annual by Jan 31
NYC Income Tax	Employee	NYC Dept. of Finance	Included in NYS-45	Quarterly / Annual	Same as NYS-45; monthly allowed if payroll exceeds threshold
NY SUI	Employer	NY State Dept. of Labor	Included in NYS-45	Quarterly / Annual	Last day of month after quarter; monthly allowed for larger payrolls
NY RSF	Employer	NY State Dept. of Labor	Included in NYS-45	Quarterly / Annual	Last day of month after quarter; monthly allowed for larger payrolls
Paid Family Leave (PFL)	Employee	Licensed insurance company	Varies by insurer	Monthly	Monthly via payroll
Disability Benefits Law (DBL)	Employee (0.5%, max $0.60/week) & Employer (rest)	Licensed insurance company	Certificate & insurer reporting	Annual / Installments	Premium billed by insurer (usually quarterly or annually; monthly installments possible)
Workers’ Compensation	Employer	Licensed insurance company	Certificate & insurer reporting	Annual / Upon changes	Annual or upon employee changes; some insurers allow monthly installments
Metropolitan Commuter Transportation Mobility Tax (MCTMT)	Employer	NYC Dept. of Finance	Included in NYS-45	Quarterly	Due 30 days after the end of each quarter; only applies if payroll in the quarter exceeds $312,500 (data for 2025) in the MCTD; funds support MTA transportation infrastructure

Element Accounting LLC specializes in NYC payroll services, helping businesses manage employee payroll deductions, employer contributions, and tax compliance efficiently. We ensure accurate calculations, timely payments, and full compliance with PFL, WC, federal, state, and city taxes.

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