Compliance
New York Payroll Compliance in 2026: What Employers Need to Know
Withholding, paid leave, pay transparency and the filings that trip up New York employers most often.
Published: 2 min read
Running payroll in New York means following federal rules, New York State rules and, for many employers, New York City rules on top. Mistakes are common and penalties add up quickly. These are the areas we review with every new client.
Withholding: state and city
New York State income tax must be withheld for employees who work in the state. Employees who live in New York City also owe NYC resident income tax, which must be withheld regardless of where the employer is located. Yonkers has its own resident and nonresident surcharge.
Remote employees add complexity. New York's "convenience of the employer" rule can require withholding for nonresidents who work remotely by choice rather than necessity.
Paid leave obligations
New York employers must provide several types of paid leave:
- New York Paid Sick Leave: up to 56 hours per year depending on employer size
- NYC Earned Safe and Sick Time: similar requirements with additional documentation rules
- Paid Family Leave: funded through employee payroll deductions and administered with disability insurance
- Paid Prenatal Leave: 20 hours per year, effective since 2025
Policies must be in writing, and accrued balances should appear on pay statements.
Pay transparency
Employers with four or more employees must include a good-faith salary range in job postings for positions that will be performed in New York. This applies to promotions and transfer opportunities as well as external postings.
Quarterly and annual filings
| Filing | Frequency | Purpose |
|---|---|---|
| Form 941 | Quarterly | Federal income tax withholding, Social Security and Medicare |
| NYS-45 | Quarterly | State withholding and unemployment insurance |
| Form 940 | Annually | Federal unemployment tax |
| W-2 and 1099-NEC | Annually by January 31 | Employee and contractor reporting |
Contractor or employee?
Misclassification is one of the most expensive payroll mistakes. New York applies strict tests, and the state's construction and commercial goods transportation industries have additional presumptions of employment. When in doubt, review the relationship before the first payment.
A quick self-check: if you set the hours, provide the equipment and the work is core to your business, the worker is likely an employee.
Building a compliant payroll process
- Register for state withholding and unemployment accounts before the first payroll
- Collect Form W-4 and Form IT-2104 from every employee
- Use a payroll provider that handles state and local taxes automatically
- Reconcile payroll to the general ledger every month
- Review classifications and leave policies at least once a year
Need help? Our payroll team manages payroll for more than 180 employers across 30 states.
