Are Employers Required to Withhold New York City Taxes?

New York City imposes a personal income tax on its residents, creating specific compliance duties for businesses. Employers are required to deduct this tax directly from the wages of their NYC-resident employees. This system ensures residents contribute to the city’s budget.

The Core Withholding Rule for NYC Residents

An employer’s obligation to withhold New York City personal income tax is determined by the employee’s residency. If an employee is a resident of one of the five boroughs, their employer must withhold these taxes from their wages, regardless of where the employee works or where the company is located within New York State.

For instance, an employee who is a resident of Brooklyn but works from home for a company in Albany is still subject to NYC tax withholding. The employer in Albany must withhold the tax because the employee lives within the city.

Conversely, an employee who lives in New Jersey but commutes to an office in Manhattan is not subject to NYC tax withholding. While New York State income tax must be withheld because their work is performed in the state, they are exempt from the city’s tax because they are not an NYC resident.

Defining an NYC Resident for Tax Withholding

New York City residency is established through two primary tests. The first is the Domicile Test, which defines a person’s true, permanent home. An employee whose domicile is within Brooklyn, the Bronx, Manhattan, Queens, or Staten Island is considered an NYC resident, and their wages are subject to city tax withholding.

The second standard is the Statutory Residence Test. An individual is considered an NYC resident if they maintain a “permanent place of abode” in the city and spend more than 183 days of the taxable year there. A permanent place of abode is a dwelling place, like a house or apartment, maintained by the individual for a substantial period.

Any part of a day spent in New York City counts as a full day, including workdays, weekends, and holidays. An employee who rents an apartment in Manhattan for the year and is physically present for more than 183 days will be deemed a statutory resident, obligating their employer to withhold NYC taxes.

Using Form IT-2104 to Manage Withholding

The primary tool for managing an employee’s withholding is Form IT-2104, the Employee’s Withholding Allowance Certificate. This form requires an employee to certify their county of residence, which informs the employer whether they are an NYC resident subject to withholding tax.

Every employee who is a resident of New York State must complete a Form IT-2104 at the time of their hiring. This form provides the necessary information, including the employee’s home address and declaration of residency for tax purposes.

If an employee fails to submit a completed Form IT-2104, the employer is not absolved of their withholding duty. The law requires the employer to proceed with withholding as if the employee were single with zero withholding allowances. This default status results in the highest rate of withholding.

How to Remit Withheld NYC Taxes

After withholding NYC income taxes, employers must remit those funds to the proper authority. These taxes are not paid directly to New York City. Instead, the withheld funds are combined with New York State income taxes and remitted as a single payment to the New York State Department of Taxation and Finance.

The remittance process is integrated into the state’s payroll tax filing schedule. Employers report their total state and city tax withholding on Form NYS-45, the Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return, which consolidates all payroll-related taxes into one filing.

Payments are made electronically through the employer’s New York State Online Services account. The frequency of these payments depends on the total amount of tax being withheld. The state assigns each employer a payment schedule, and employers must make timely deposits to avoid penalties and interest.