New Mexico Salary Paycheck Calculator
Running your successful New Mexico business requires countless skills. Sales, marketing, production, and administration keep business owners busy. But don’t forget about staying up to speed with payroll taxes! Paying your employees correctly and on-time—and paying your payroll taxes—keeps you in everyone’s good graces.
We’ve put together answers to the most common questions employers have about New Mexico payroll taxes below. And if you’d rather leave payroll compliance in the hands of professionals, we’ve got you covered.
New Mexico state payroll taxes
Does New Mexico have a withholding tax?
Yes. Employers that withhold federal income taxes from employees’ paychecks will need to withhold New Mexico state income taxes, including for non-residents working in New Mexico.
Certain workers are exempt from withholding. That means you won’t have to take state income taxes out of their paychecks.
What is the personal income tax rate in New Mexico?
In 2022, New Mexico’s personal income tax ranges from 1.7% to 5.9%.
How is withholding tax in New Mexico calculated?
The amount of state income tax you’ll withhold from paychecks is calculated using information on federal Form W-4, Employee’s Withholding Certificate. The withholding amount is also based on how often you pay your workers. Employees should complete Form W-4 when they start working for you. A new W-4 isn’t required each year, but it is good practice to have workers review it annually for changes.
You’ll use New Mexico’s tax tables, along with W-4 information and your employee’s pay amount to figure out how much tax to take out.
When is New Mexico withholding tax due?
You’ll pay the tax monthly, quarterly, or semi-annually based on the classification assigned to your business when you register with the New Mexico Taxation and Revenue Department.
Does New Mexico have unemployment tax?
In New Mexico, employers are responsible for paying state unemployment tax. How much you’ll pay is based upon a complex formula that factors in things like your historical payroll amounts and the balance of the unemployment trust fund.
If you’re a new employer in New Mexico, you’ll pay unemployment tax rates based on your industry’s average, but it won’t be less than 1%.
All businesses pay tax on the first $28,700 of each employee’s pay for 2022. This amount is called the wage base and it can change.
Unemployment taxes are paid quarterly to the New Mexico Department of Workforce Solutions. Quarterly reports are required to be submitted online, even in quarters when you have no wages or no tax due.
When is Workers’ Compensation insurance required in New Mexico?
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.
What’s the salary threshold in New Mexico?
Because the state of New Mexico doesn’t have its own salary threshold, it adheres to the federal salary threshold, which is now $684 per week (equivalent to $35,568 per year for a full-year worker). The Department of Labor permits employers to count some bonuses, commissions, and other incentive payments toward meeting the standard salary level (up to 10%). Employees who earn at least $107,432 per year may qualify as “highly compensated.” See this Department of Labor fact sheet for details.
When are final paychecks due to former employees?
It depends on whether the employee leaves their position voluntarily or involuntarily. For workers who resign or quit, you must give final paychecks no later than the next payday. When you terminate someone’s employment, final payment of regular wages is due within five days. If you owe them commissions or piecework pay, you have ten days to pay.
Do new hires need to be reported in New Mexico?
Federal payroll taxes
How is FICA tax calculated?
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.
|FICA Tax in 2022|
|Social Security||6.2% on the first $147,000 in wages|
|Medicare||1.45% on all wages|
What is the Additional Medicare tax?
The Additional Medicare tax was enacted as part of the Affordable Care Act. As an employer, you’ll need to withhold the Additional Medicare tax from any employee earning more than $200,000 per year. For 2022, the tax rate is 0.9% on wages above $200,000.
How is federal withholding tax calculated?
Since the U.S. uses a pay-as-you-go tax system, employees need to have federal income tax taken out of their paychecks to pay their tax bill.
You’ll use Form W-4, Employee’s Withholding Certificate, along with your employee’s wages and some federal tax tables to figure out how much to withhold. Using payroll software can make this process easier. With just a few clicks, the software will make all your tax calculations for you.
Keep the W-4s in your payroll records. Don’t send them to the IRS.
Is there a federal unemployment tax?
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.
When do I pay federal payroll taxes?
Depending on how much tax you owe, you’ll pay:
- quarterly, or
The IRS has a guide to help employers understand federal tax payments. In addition to paying the tax, payroll tax returns are also required.
Form 941, Employer’s Quarterly Federal Tax Return, is required each quarter for FICA, withholding tax, and the Additional Medicare tax, regardless of your payment frequency.
And Form 940, Annual Federal Unemployment (FUTA) Tax Return, is due either quarterly or annually, depending on when you pay.
If you’re now enchanted with payroll and payroll taxes, you can get started right away. But if you want some help, check out Gusto’s services.