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A Complete Guide to New Mexico Payroll Taxes

CAVU HCM. Man calculating taxable wages on wood table.

Among the many responsibilities business owners have, few are as daunting as managing payroll and taxes. With complicated industry jargon, confusing forms, and steep penalties, even the most experienced employer can get overwhelmed. 

Luckily, CAVU HCM’s team of payroll experts is here to help.

In this article, we will examine the main types of payroll taxes that New Mexico-based employers are expected to pay, as well as the state and federal tax forms they are required to submit monthly, quarterly, semi-annually, and annually.

Contents:

Types of New Mexico Payroll Taxes

As a New Mexico-based business owner, you are ultimately responsible for filing state and federal payroll taxes. Luckily, there are no local payroll taxes.

In this section, we will review the main state and federal payroll taxes every employer in New Mexico is responsible for.

FICA and Employment Taxes

Employers in all 50 states are required to deduct federal taxes from every employee’s paycheck for the Federal Insurance Contributions Act (FICA). FICA taxes provide funding to the Social Security program and Medicare, two government-led programs that provide welfare and healthcare to millions of Americans. 

Both employers and employees are required to contribute to FICA taxes – generally at a rate of 7.65%.  The FICA tax is the combination of both a Social Security tax (6.2%) and Medicare tax (1.45%).

CAVU HCM. Woman sharing tax forms over a desk.

Nearly all forms of payment (cash, check, deposit, etc.) are considered taxable wages. This includes base pay, whether hourly, weekly, piecework, or another type of arrangement. Of course, a few forms of payment are exempt from FICA taxation, which are outlined in IRC section 3121(a). These exemptions include:

  • Wages paid to disabled employees that collect Social Security disability insurance benefits
  • Wages paid following an employee’s death
  • Retirement contributions by an employer
  • Expense reimbursements for driven mileage.

Each year, the Social Security Administration (SSA) sets a maximum taxable wage for FICA taxes. For 2022, taxable wages are capped at $147,000, an incremental raise from 2021’s $142,800.

Federal Withholding

In the US, every employer must withhold income from each of their employee’s paychecks and earnings.

The amount withheld from each employee’s wages is based upon the amount they earned and the information on their W-4 form. To estimate how much should be withheld from each employee’s paycheck, employers should use the IRS’s withholding tables. Employers can also use the Income Tax Withholding Assistant, available on the IRS’s website. 

Along with their wages, employers should withhold income from their employee’s nonresident distributions, pension and annuity payments, lottery winnings, and similar sources of income.

For more information, visit the Internal Revenue Service.

State Withholding

In New Mexico, every employer that withholds a portion of their employee’s wages for federal income tax must also withhold for state income tax. Specifically, state taxes are withheld from:

  • Wages
  • Nonresident distributions
  • Pension and annuity payments
  • Lottery winnings
  • Other sources of income

There is no standard withholding tax rate in New Mexico. Instead, state withholding is determined by wages earned and allowances claimed by each individual. As a result, employers should use an employee’s Form W-4 and New Mexico’s withholding tax tables (FYI-104) to estimate the withholding rate for each individual in their payroll.

Business owners should report their state withholding with Form TRD-41414 or Form TRD-41409. 

Notably, Native American members of federally recognized Indian nations, tribes, and pueblos who earn income on their recognized land are exempt from state withholding taxes. 

Note: there is no local income tax in the state of New Mexico.

Unemployment Insurance Taxes

Unemployment insurance provides eligible individuals with financial aid while they pursue new employment opportunities. Generally speaking, unemployment insurance is managed on the state level, though the federal government can issue it during national emergencies, such as the COVID-19 pandemic.

Like other welfare programs, unemployment insurance is funded almost entirely by tax contributions. As a result, every business is required to contribute to the state and federal unemployment insurance funds by paying their respective “unemployment tax.”

Defined by New Mexico’s State Unemployment Tax Act (SUTA), the taxable wage base is $28,700. An individual company’s SUTA tax rate is calculated based on:

  • Benefit ratio
  • Reserve factor
  • Experience history factor

New employers in New Mexico have a SUTA tax rate of 1.0% for 2022. Experienced employers have a tax rate range from .33% to 6.4%, depending on the factors listed above.

Additionally, the Employer’s Annual Federal Unemployment (FUTA) tax rate is 6.0%, applied to the first $7,000 paid to each employee’s wages during the year. Businesses can receive credit reductions of up to 5.4% when filing their Form 940, reducing their FUTA tax rate to 0.6%.  

Employers are responsible for paying both SUTA and FUTA.

Note: Employers are required to post a notice regarding state unemployment claims in a common space for all employees to see, typically using a poster.

CAVU HCM. Woman calculates state withholding taxes using withholding tables.

Payroll Tax Forms for New Mexico Employers

As one can expect, New Mexico-based business owners must properly file and submit the appropriate forms in order to pay their state and federal taxes. While all of these forms are listed on the appropriate state and federal governments’ webpages, figuring out which ones to submit can be confusing.

In this section, we will review the primary payroll forms that business owners in New Mexico should expect to file on a consistent basis.

State Tax Forms

Form TRD-41414

In the state of New Mexico, employers must submit Form TRD-41414, Wage Withholding Tax Return, for each employee they pay. Wages are considered any form of remuneration (cash, check, direct deposit, etc.).

Importantly, Form TRD-41414 should only be used for withheld wages. Non-wage withholding, like pensions and gambling winnings, must be reported on Form TRD-41409.

Employers have different requirements for residents and non-residents. When filing Form TRD-41414 for residents, employers must withhold state income taxes regardless of the employee’s location. For non-residents, however, employers are only required to withhold taxes for wages earned within the state.

In order to calculate how much of an employee’s wages should be withheld, employers should refer to the State Withholding Tax Tables found in FYI-104.

Employers must submit Form TRD-41414 for each of their employees by the 25th of the month following the end of their respective tax period. If the 25th falls on a weekend or legal holiday, then Form TRD-41414 is due the following business day. Late filings can result in interest or penalties.

Form TRD-41414 can be submitted digitally through TAP or by mail. Physical forms and payment can be sent to:

Wage Withholding Tax Correspondence 
Taxation and Revenue Department 
P.O. BOX 25128 
Santa Fe, NM 87504-5128

Note: Employers may be required to file monthly, quarterly, or semi-annually. In order to find your filing status, refer to your Registration Certificate from the Taxation and Revenue Department.

CAVU HCM. Federal tax withholding forms with pen and coffee.

Form ES-903

Every quarter, New Mexico-business owners must submit Form ES-903, Employer’s Quarterly Wage & Contribution Report, if they have paid employees. In the report, employers must list all wages paid to all workers, as well as pay a tax at the rate applicable to their account. 

On the form, employers must provide the amount of gross wages paid, state taxes withheld, and worker’s compensation fees collected for each employee.

As the name implies, employers must file Form ES-903 on a quarterly basis. The report is due on or before the final day of the month following the completed quarter. For 2022, ES-903 must be submitted by:

  • Q1 (January-March): 4/30/2022
  • Q2 (April-June): 7/31/2022
  • Q3 (July-September): 10/31/2022
  • Q4 (October-December): 1/31/2023

This particular quarterly report must be submitted even if no wages were paid during the period. Additionally, employers should not use credits or adjust wages for previous quarters on the current report. Any quarterly wage adjustments must be reported on Form ES-903C.

Note: An employer that submits Form ES-903 is not required to submit Form W-2 to the Taxation and Revenue Department. 

Form TRD-31109

Employers must file Form TRD-31109, Employer’s Quarterly Wage, Withholding and Workers’ Compensation Fee Report, if they are not required to submit Form ES-903.

Form TRD-31109 collects various payroll information for each employee, including:

  • Gross wages paid
  • State taxes withheld
  • Workers’ Compensation fees collected

Like Form ES-903, this report must be submitted on a quarterly basis. Specifically, Form TRD-31109 is due by the last day of the month following the conclusion on the calendar quarter. In the case that the due date falls on a weekend or legal holiday, the form is due by the next business day.

Employers can file their report digitally using their TAP account, or by mail:

Wage Withholding Tax Correspondence 
Taxation and Revenue Department
P.O. Box 2527
Santa Fe, NM 87504-2527

Form TRD-41409

New Mexico businesses should file and submit Form TRD-41409, Non-Wage Withholding Tax Return, for individuals who withhold state tax payments for pensions, annuities, and gambling winnings. Although only three forms of payment are required for the non-wage withholding tax return, individuals may withhold state tax on other types of non-wage payments if they choose to.

While pension and annuity income is subject to state taxes in New Mexico, the state does not require business owners to withhold taxes on retirement payments unless the payee requests them to be withheld.

However, operators of gambling establishments (casinos, bingo halls, lotteries, race tracks, etc.) must report, withhold, and pay 6% of all winnings for both residents and non-residents. Indian nations and their related agencies are exempt from these requirements and do not need to deduct or withhold payments made to members or spouses of their Indian nation, tribe, or pueblo.

CAVU HCM. Gambling winnings on table in casino.

Notably, employers should not include withholding for oil and gas proceeds on their Non-Wage Withholding Tax Return. Instead, they should file Form RPD-41284, Quarterly Oil and Gas Proceedings Withholding, or Form RPD-41367, Pass-Through Entity Withholding Detail report.

Like Form TRD-41414, employers must submit their Non-Wage Withholding Tax Return by the 25th of the month following the end of their respective tax period. If the due date falls on a weekend or legal holiday, then Form TRD-41409 is due the following business day. 

Employers can submit Form TRD-41409 digitally or by mail:

Wage Withholding Tax Correspondence 
Taxation and Revenue Department 
P.O. BOX 25128 
Santa Fe, NM 87504-5128

Note: Employers may be required to file monthly, quarterly, or semi-annually. In order to find your filing status, refer to your Registration Certificate from the Taxation and Revenue Department.

Form WC-1

In New Mexico, every employer covered by the Workers’ Compensation Act must file Form WC-1, Workers’ Compensation Fee Form, as well as pay the related fees. Each employer who receives Form WC-1 must file their respective report, even if they are not required to pay a fee in the quarter.

As of 2022, the fee for employers is $2.30 per every covered employee working on the final day of the quarter; the fee for covered employees working on the final day of the quarter is $2.00. 

Like other quarterly reports, WC-1 must be submitted every quarter. Employers must submit their report on or before the final day of the month following the completed quarter. For 2022, WC-1 must be submitted by:

  • Q1 (January-March): 4/30/2022
  • Q2 (April-June): 7/31/2022
  • Q3 (July-September): 10/31/2022
  • Q4 (October-December): 1/31/2023

Importantly, the fee related to Form WC-1 is different than the standard worker’s compensation insurance premium. As such, paying the WC-1’s fees does not necessarily mean the employer has workers’ compensation insurance coverage – to learn more, visit New Mexico’s Workers’ Compensation Administration.

Note: employers are required to post a notice regarding insured workers’ rights in a common space for all employees to see, typically using a poster.

CAVU HCM. Man reviews his tax forms.

Federal Tax Forms

Form W-4 

In order to determine federal withholdings, employers must have their employees complete Form W-4, Employee’s Withholding Certificate.

An employee’s Form W-4 is used to calculate how much federal income tax will be deducted and withheld from their individual pay. On the form, employees identify their individual filing status, current income, amount of tax credits, multiple job adjustments, and additional withholdings. If an employee fails to submit a Form W-4 then the employer must withhold federal income taxes as if the individual were a single filer with no additional entries.

Employees are entitled to update their Form W-4 if their financial or personal situation changes. Employers are required to implement these changes by the start of the first payroll period – on or after the 30th day from the date the revision was received.

Form W-2 

Form W-2, Wage and Tax Statement, is used in conjunction with Form W-4 to report withheld Federal Insurance Contribution Act (FICA) taxes for each individual employee. These tax contributions go towards Medicare and Social Security services.

Employers are required to submit a Form W-2 for every individual they pay in exchange for a service, including non-cash payments of $600 or more. Like most federal tax forms, Form W-2 must be submitted for each employee on an annual basis.

Although employees provide their personal information via Form W-4, it is ultimately the responsibility of the employer to file Form W-2 and pay the withheld taxes. Yearly submissions are due by January 31st, or the next business day if there is a holiday or weekend. The form can be submitted digitally via the Social Security Administration’s Employer W-2 Filing Instructions and Information portal.

Form 940

Employers are required to report their annual Federal Unemployment Tax Act (FUTA) tax with Form 940. Currently, the Employer’s Annual Federal Unemployment (FUTA) tax rate sits at 6.0%, and is applied to the first $7,000 paid to each employee’s wages.

According to Form 940’s instructions, a typical employer must file if:

  • They paid wages of $1,500 or more to employees in any calendar quarter during the taxed year.
  • Had one or more employees for at least some part of a day in any 20 or more different weeks in the taxed year.
  • They meet additional requirements for household and agricultural employees, tax-exempt organizations, or local/state governments.

Form 940 and its related tax payment must be submitted to the IRS by January 31st, 2023. Employers are encouraged to submit their forms electronically, and are required to submit their tax deposit via Electronic Funds Transfer.

Form 941

Form 941, Employer’s Quarterly Federal Tax Return, is used to report the income taxes and FICA taxes  withheld from each employee’s paycheck on a quarterly basis.

Like state forms, Form 941 is due at the end of the month that follows the end of the quarter. The specific quarterly deadlines for 2022 are:

  • Q1 (January-March): 5/02/2022
  • Q2 (April-June): 8/01/2022
  • Q3 (July-September): 10/31/2022
  • Q4 (October-December): 1/13/2023

When paying the withheld taxes, employers must submit Form 941-V, Payment Voucher. To avoid penalties, employers should only submit the voucher if:

  • Total taxes after adjustments and nonrefundable credits for either the current or preceding quarter are less than $2,500
  • There was no incurrence of a $100,000 next-day deposit obligation during the current quarter
  • Payment is being made in full with timely return
  • The employer is a monthly schedule depositor, in accordance with the Accuracy of Deposits Rule.

In the case the requirements are not met, employers should file payment via Electronic Fund Transfer.

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Transform Your Payroll with CAVU HCM

Even with a complete guide, managing your payroll and taxes can still be a stressful endeavor. With multiple deadlines, similarly named forms, and unclear instructions, even the most experienced business owner can find themselves overwhelmed – especially when facing a slew of potential penalties for improper filings.

Luckily, CAVU HCM’s Albuquerque office is ready to help New Mexico businesses of all sizes!

With a premium software solution and expert-led concierge services, our all-in-one offering removes the stress from your payroll process and guarantees local, state, and federal compliance. Our expert Payroll Guides even help oversee your entire payroll process, including the submission of all appropriate tax forms, the acquisition of available tax credits, and more.

To learn more about our Payroll Solutions, click here.