Payroll tax in New Mexico: What employers need to know [2024]

Known as the land of enchantment, New Mexico boasts diverse landscapes from Albuquerque to Santa Fe. But it's also a great place to do business.

New Mexico only has two state payroll taxes. Regardless of your business size, you’ll be responsible for managing both, along with federal taxes—like Medicare and Social Security contributions. Failure to comply with New Mexico’s state-specific tax laws can land you in legal trouble, so it’s best to stay up-to-date on the latest regulations.

You’re likely wondering: How much is New Mexico’s income tax? When are your unemployment tax payments and reports due? We’ll cover that and much more in this guide. Read on for a walkthrough of New Mexico’s state payroll taxes.

The 2 New Mexico payroll taxes

Employers in New Mexico must withhold taxes from their employees' salaries and wages. The state has two payroll taxes you must remit: unemployment insurance tax (SUI) and state income tax. 

New Mexico employers must also report all new hires and re-hired employees on the New Hire Reporting Directory website within 20 days of hiring and provide the following forms along with their W-4: Combined Report Form (CRS-1), Workers’ Compensation Fee Form (WC-1), Employer’s Quarterly Wage and Contribution Report (ES-903A), Wage and Tax Statement (State W-2), and Annual Withholding Form (RPD-41072).

Please note that New Mexico doesn't have an equivalent state form for the Federal W-4. To comply with New Mexico wage withholding tax requirements, employees should use the Federal Form W-4 and write "For New Mexico State Withholding Only" prominently on it. 

Let’s take a closer look at what these payroll taxes cover, who is responsible for paying them, and the maximum tax amount you may have to pay.

Unemployment insurance tax

The state unemployment insurance tax is administered under the State Unemployment Tax Act (SUTA) and overseen by the New Mexico Department of Workforce Solutions. This program provides temporary payments to employees who have lost their jobs through no fault of their own. 

Employers are responsible for paying SUI taxes in New Mexico. The taxable wage base for experienced employers is $30,100, and tax rates range from 0.33% to 5.4%. However, if you’re a new employer, you will be charged SUI taxes at a rate of 1% or your industry's average, whichever is greater.

State income tax

In addition to federal income tax, New Mexico employers must withhold state income tax from their employees' wages. The amount of income tax withholding depends on the individual's income and the number of allowances they claim. There are a few exemptions: New Mexico Native Americans that are part of and live on their nation's lands are exempt from personal income tax withholding requirements, as are those with income earned from active-duty military service.

To calculate the withholding rate for each employee’s taxable income, employers can use the employee's Form W-4 and New Mexico's withholding tables (FYI-104). You can report state withholding using Form TRD-41414.

Payroll tax due dates in New Mexico

State unemployment insurance tax

New Mexico employers must file Unemployment Tax and Wage Reports (Form ES-903A) and pay state unemployment taxes to the New Mexico Department of Workforce Solutions at the end of each quarter. The due dates for these filings are on the last day of the following month. If the due date falls on a weekend or a state holiday, the next business day becomes the new due date.

• First quarter (January-March): Due April 30
• Second quarter (April-June): Due July 31
• Third quarter (July-September): Due October 31
• Fourth quarter (October-December): Due January 31

State income tax

As an employer, you must mention your business name and New Mexico Business Tax Identification Number (NMBTIN) on all forms, schedules, and correspondence you send to the Department. The NMBTIN was formerly known as the combined reporting system identification number or CRS ID. Submit Form TRD-41414 by the 25th of the following month for each employee.

You also have the options of semi-annual or monthly payments, depending on your filing status. If you file late or submit your payments past the due date, you'll be penalized 2% of the tax owed per month or part month late, up to 20%.

How to submit payroll taxes in New Mexico

Now that you know about the types of New Mexico state payroll taxes, the next step is filing and paying them. Each tax type has a different method, but electronic filing is available. Here are the options.

State income tax

Enroll online

You can pay the state income tax at the Taxpayer Access Point (TAP) website, where free electronic check payments and credit card payments are accepted. Visa, MasterCard, American Express, and Discover are all accepted, too. You will receive an online confirmation once you submit your payment information. Debit and credit card payments are reflected in your balance on TAP immediately.

With TAP, you can view your payment history, set up a payment plan, select filing status, make estimated payments, and more.

By mail

To remit your payment, you can mail a check or money order to the Taxation and Revenue Department along with a payment voucher. Make your check or money order payable to the New Mexico Taxation and Revenue Department. You must attach a payment voucher to the check or money order for specific tax payments to ensure your payment is applied correctly. The address will depend on the type of tax you're paying, which you can find here.

State unemployment tax

To pay the state unemployment tax, employers must register with the New Mexico Department of Workforce Solutions. After registering, you’ll receive an Employer Account Number (EAN) that you can use to manage and pay your unemployment taxes in the Unemployment Insurance Tax & Claims System. You must activate your account to submit your wage records and contribution payments to NMDWS.

Rippling’s full-service payroll software

Looking for an easy payment solution? Rippling’s payroll software can help simplify your payroll process. It automates compliance tasks and submits payroll taxes accurately and promptly to federal and New Mexico state authorities.

FAQs about New Mexico payroll taxes

Are there local tax laws in New Mexico?

No, New Mexico doesn’t have any local income tax laws.

Can your tax returns be audited in New Mexico?

Yes. The New Mexico Taxation and Revenue Department conducts audits to ensure taxpayers, including employers, comply with New Mexico tax regulations.

Are nonprofit organizations subject to payroll taxes in New Mexico?

Some nonprofit organizations are responsible for withholding and paying New Mexico's payroll taxes. However, if an organization has an exemption under the Internal Revenue Code (IRC) Section 501(c)(3), it’s not required to pay New Mexico's income tax withholding.

Nonprofits exempt from federal unemployment taxes can voluntarily participate in the state unemployment insurance. They also get to decide how they want to pay for it.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.