New York employers pay the federal payroll taxes every U.S. employer owes — Social Security, Medicare, and federal unemployment — plus a state layer that includes unemployment insurance, mandatory disability and paid family leave coverage, income tax withholding, and, for businesses in the New York City region, the Metropolitan Commuter Transportation Mobility Tax. The payroll taxes employers pay in New York shift noticeably in 2026, led by a jump in the state unemployment insurance wage base from $12,800 to $17,600 per employee.
Federal FICA and FUTA
Social Security tax is 6.2% on each employee’s wages up to the annual wage base, which is $184,500 for 2026. Medicare tax is 1.45% with no wage cap. You pay those percentages as the employer, and your employee pays a matching amount through withholding.1Social Security Administration. Contribution and Benefit Base2Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates For a worker earning at or above the Social Security wage base, the employer side of FICA alone runs $11,439 plus 1.45% of everything above that.
Federal unemployment tax (FUTA) is nominally 6.0% on the first $7,000 of each employee’s wages, paid entirely by the employer.3Office of the Law Revision Counsel. 26 USC 3301 – Rate of Tax4Office of the Law Revision Counsel. 26 USC 3306 – Definitions If you pay your state unemployment taxes on time, you receive a 5.4% credit, which drops the effective FUTA rate to 0.6% — about $42 per employee per year.5U.S. Department of Labor. FUTA Credit Reductions If New York ever becomes a “credit reduction” state because of outstanding federal unemployment loans, that effective rate climbs. Check the Department of Labor’s annual credit reduction list each year.
New York Unemployment Insurance
State unemployment insurance (SUI) is usually the biggest variable employer-paid tax in New York, and 2026 makes it bigger. Starting this year, New York permanently ties the SUI taxable wage base to 18% of the statewide average annual wage, rounded up to the nearest $100. That puts the 2026 wage base at $17,600 per employee, up from $12,800 in 2025 — a 37.5% increase in a single year.6New York State Department of Labor. NYS-45 Quarterly Reporting The formula replaces the old schedule of incremental increases that had been in place for over a decade.
Your SUI rate depends on your experience rating, which reflects how many former employees have collected unemployment benefits against your account. Stable workforces pay less; high-turnover businesses pay more. For 2026, total SUI contribution rates range from 1.7% to 9.5% of the $17,600 wage base.7New York State Department of Labor. Unemployment Insurance Rate Information That total bundles the basic experience-based UI rate, a subsidiary contribution that adjusts annually to keep the fund solvent, and a 0.075% Reemployment Service Fund charge that applies to every employer.
New employers who don’t yet have an experience record pay a starting rate of 4.1% for 2026 (including the Reemployment Service Fund charge). That initial rate holds until the state has enough history to calculate your experience-based rate. You’ll get an annual Notice of Unemployment Insurance Rate with your specific numbers.
Metropolitan Commuter Transportation Mobility Tax
If your business operates in the 12-county Metropolitan Commuter Transportation District, you may owe the MCTMT. It is employer-paid and cannot be deducted from employee wages. The tax applies if you withhold New York State income tax and your quarterly payroll for covered employees inside the district exceeds $312,500.8New York State Department of Taxation and Finance. Metropolitan Commuter Transportation Mobility Tax (MCTMT)
The district is split into two zones. Zone 1 is the five New York City boroughs (Manhattan, Bronx, Brooklyn, Queens, Staten Island). Zone 2 is Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester counties.
Zone 1 Rates
For quarters beginning on or after July 1, 2025:8New York State Department of Taxation and Finance. Metropolitan Commuter Transportation Mobility Tax (MCTMT)
- Up to $375,000: 0.055%
- $375,001 to $437,500: 0.115%
- $437,501 to $2,500,000: 0.60%
- Over $2,500,000: 0.895%
Zone 2 Rates
- Up to $375,000: 0.055%
- $375,001 to $437,500: 0.115%
- $437,501 to $2,500,000: 0.34%
- Over $2,500,000: 0.635%
A business with $5 million in quarterly New York City payroll pays 0.895% on the full amount. Employers with payroll in both zones calculate each zone separately. Local government employers in Zone 2 are fully exempt, and local government employers in Zone 1 are capped at 0.60% regardless of payroll size. Report quarterly on Form MTA-305.9Department of Taxation and Finance. Metropolitan Commuter Transportation Mobility Tax
State and Local Income Tax Withholding
New York personal income tax is the employee’s liability, but you’re responsible for withholding it correctly, and errors create employer liability. Withholding is based on each employee’s Form IT-2104, the state equivalent of the federal W-4.10Department of Taxation and Finance. Instructions for Form IT-2104 Employee’s Withholding Allowance Certificate If an employee submits a federal W-4 from 2020 or later but never files an IT-2104, you may use zero allowances for state withholding. Use the state’s official withholding tables — either the wage bracket method or the aggregate method — and keep the trust funds separate until you remit.
Local withholding adds another layer in two places. New York City residents owe city personal income tax, and Yonkers residents owe a surcharge equal to 16.75% of their state tax liability.10Department of Taxation and Finance. Instructions for Form IT-2104 Employee’s Withholding Allowance Certificate Both require separate calculations.
Disability Benefits and Paid Family Leave
New York requires every employer to carry two insurance coverages: short-term disability under the Disability Benefits Law (DBL) and Paid Family Leave (PFL). Neither is a payroll tax in the strict sense, but both involve mandatory deductions and employer compliance that function like one.
DBL covers non-work-related illness and injury. You can obtain it through a licensed insurer or an approved self-insurance plan, and you can offset the cost through employee contributions capped at the lesser of 0.5% of weekly wages or $0.60 per week.11Workers’ Compensation Board. Disability Benefits Anything beyond that cap falls on you. The New York State Insurance Fund set its 2026 standard DBL premium at $17.68 per person annually, down from $24.75 in 2025.
PFL provides job-protected leave for bonding with a new child, caring for a seriously ill family member, or handling needs related to a family member’s military deployment. It is funded almost entirely through employee payroll deductions, but you’re responsible for securing coverage and taking the deductions correctly. For 2026, the employee contribution is 0.432% of gross wages, capped at $411.91 for the year.12New York Department of Financial Services. PFL Rate Decision 2026 The cap tracks the 2026 statewide average weekly wage of $1,833.63, which also sets the maximum weekly benefit at $1,228.53.13New York State. New York Paid Family Leave Updates for 2026 Letting DBL or PFL coverage lapse violates state law and exposes the business to financial penalties.
When and How to Deposit and File
Federal employment tax deposits go through the Electronic Federal Tax Payment System or your IRS business tax account. Your deposit schedule depends on a lookback period: if your total tax liability during the lookback was $50,000 or less, you deposit monthly (by the 15th of the following month); if it was more, you deposit semi-weekly, within a few business days of each payroll.14Internal Revenue Service. Depositing and Reporting Employment Taxes15Internal Revenue Service. Topic No. 757, Forms 941 and 944 – Deposit Requirements Reconcile quarterly on Form 941. At year end, issue a W-2 to each employee and file a summary W-3 with the Social Security Administration by January 31. If you file 10 or more information returns combined, you must file them electronically.16Internal Revenue Service. Topic No. 801, Who Must File Information Returns Electronically
State deposits for income tax withholding and MCTMT are remitted electronically through the Department of Taxation and Finance’s online services, on a schedule that also runs from monthly to semi-weekly based on prior liability. The main state reconciliation is Form NYS-45, the Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return, which bundles state withholding, SUI, and employee wage reporting into one return.17Department of Taxation and Finance. Form NYS-45, Quarterly Combined Withholding, Wage Reporting and Unemployment Insurance Return Paper filing of withholding returns can trigger penalties.
Penalties and Personal Liability
Late federal employment tax deposits trigger tiered penalties that escalate quickly:18Internal Revenue Service. Failure to Deposit Penalty
- 1 to 5 days late: 2% of the unpaid deposit
- 6 to 15 days late: 5%
- More than 15 days late: 10%
- After an IRS notice demanding immediate payment: 15%
The tiers replace each other rather than stack. A deposit 10 days late is at 5%, not 2% plus 5%.
The more serious exposure is personal. Social Security, Medicare, and income tax withholdings are trust fund taxes: the employer holds them for the government. If a business fails to remit, the IRS can assess the Trust Fund Recovery Penalty — 100% of the unpaid trust fund taxes — against any individual who was responsible for collecting and paying them and willfully failed to do so. That can reach officers, directors, and bookkeepers with authority over payroll disbursements. Payroll tax problems can stop being a business problem and become a personal one.