New Mexico Hourly Paycheck Calculator
New Mexico has enchanted people for centuries. And what’s not to love? The beautiful Four Corners area, the red sand deserts, and high snow-capped mountains offer something for everyone.
As a business owner in New Mexico, you may be enchanted with its natural beauty, but you may be far less delighted with its payroll taxes. We’ve assembled this guide to help you navigate the payroll tax maze so you can get back to being enchanted.
New Mexico state payroll taxes
New Mexico withholding tax
If you withhold federal income tax from your employees’ paychecks, you’ll also need to withhold New Mexico state income tax. Non-residents working in New Mexico need to have New Mexico withholding too—but certain workers are exempt from withholding.
New Mexico uses progressive individual tax rates and for 2022, rates range from 1.7% to 5.9%.
The amount of tax you’ll take out of paychecks depends on information from federal Form W-4, Employee’s Withholding Certificate, and how often you pay employees. New Mexico doesn’t have a state equivalent to the federal withholding form.
Using New Mexico’s tax tables, your employee’s Form W-4 information, and their wages, you’ll be able to calculate how much tax to take out. If you prefer an automated calculation, use payroll software that can do the math for you.
Paying and filing New Mexico withholding tax
You’ll need to pay the withholding tax and file a summary report to the New Mexico Taxation and Revenue Department monthly, quarterly, or semi-annually based on the classification assigned to you when you register your business.
The summary report you’ll file using Form CRS-1 is a combined report that shows your withholding tax, gross receipts tax, and compensating taxes and was redesigned in July 2022 to streamline filing and paying your taxes.
You can file and pay online via the Taxation and Revenue Department’s portal or send the report and check via mail.
New Mexico withholding tax
Requirements to obtain Workers’ Compensation vary by state, this table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information.
New Mexico unemployment tax
New Mexico’s unemployment insurance program collects tax from employers to provide benefits to workers who are out of work through no fault of their own.
Rates are calculated based on a lengthy formula that includes your previous claims history, the amount of your historical payroll, and the balance of the unemployment insurance fund—among other factors.
New employers will pay rates based on their industry’s average rate but not less than 1%.
The wage base for New Mexico’s unemployment tax is $28,700 for 2022. That means employers only pay tax on each employee’s wages up to this amount.
You’ll pay the taxes quarterly to the New Mexico Department of Workforce Solutions and submit quarterly reports electronically. Reports are due even in quarters when you paid no wages or have no tax due.
Other New Mexico payroll rules
Here are other essential payroll rules to keep in mind.
- Minimum wage: New Mexico’s minimum wage is $11.50* per hour as of January 1, 2022, and will increase next year.
|New Mexico’s Minimum Wage|
|Effective Date||Minimum Wage|
|January 1, 2022||$11.50 per hour|
|January 1, 2023||$12.00 per hour|
- Final paychecks: Unless an employment contract states otherwise, employees who quit must be paid their final wages by the next payday. And if you let the employee go, regular wages are due within five days of discharge, and commissions or piecework are due within ten days.
- New hire reporting: Report all new or rehired employees to the New Mexico New Hire Reporting Center within 20 days of their hire date.
- Overtime: Overtime pay of at least one and one-half times the regular rate must be paid for hours worked over 40 in a workweek.
Federal payroll taxes in New Mexico
Don’t forget about federal payroll taxes! You’ll need to pay them and also collect them from your employees.
There are four to keep in mind.
- Federal income tax (FIT)
- Federal unemployment tax (FUTA)
- Social Security and Medicare taxes (FICA)
- Additional Medicare tax
Federal income tax (FIT)
This a pay-as-you-go tax system. That means employees need to have income tax taken out of their paycheck each pay period. And it’s your responsibility to figure out how much to withhold.
Thankfully, payroll software can take the guesswork out of it, saving you time and money. But we’ll cover the basics you’ll need to know to get started.
Employees need to complete Form W-4, Employee’s Withholding Certificate, when they begin working for you. This form will give you essential information about your employee’s tax situation.
On this form, they’ll let you know their tax filing status and the number of dependents they have. This will form the foundation of the withholding calculation. However, they can also elect to have additional tax withheld from their wages over and above the calculated amount.
Also, some employees may be exempt from withholding and they’ll indicate that on Form W-4. That means you won’t need to take out any income tax withholding from their pay.
Once you have Form W-4, you’ll take their pay amount and look through the federal tax tables to determine how much to withhold.
Federal unemployment tax (FUTA)
Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but many employers only have to pay 0.6% each year.
Social Security and Medicare taxes (FICA)
The Federal Insurance Contributions Act, or FICA tax, is made up of the Medicare tax and the Social Security tax. In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. The Medicare tax requires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.
Additional Medicare tax
For any employee earning more than $200,000 per year, you’ll need to take out 0.9% for the Additional Medicare tax on the excess wages.
Paying and filing federal payroll taxes
FIT, FICA, and the Additional Medicare tax are paid to the IRS either monthly or semi-weekly, depending on the amount of tax due. And Form 941, Employer’s Quarterly Federal Tax Return, is required each quarter, regardless of your payment frequency.
FUTA is generally paid annually in January for the preceding calendar year. But quarterly payments may be required. And Form 940, Annual Federal Unemployment (FUTA) Tax Return, is due when you pay.
Now you know the basics—and if you’d rather have a professional take the reins, consider a comprehensive payroll provider that can calculate your paychecks, prepare your payroll tax returns, and onboard employees.