Your Ultimate Guide to New Mexico Payroll

Employers must navigate various regulations and requirements to ensure proper payroll withholding in each US state. On top of withholding federal taxes such as Medicare and Social Security taxes, you are also responsible for withholding and paying certain New Mexico state taxes from your employee’s payroll. These taxes together are referred to as employer payroll taxes or payroll withholding. 

This guide introduces what employers need to pay and withhold from payroll in New Mexico, including unemployment insurance, personal income tax, and workers’ compensation. 

Paying unemployment insurance

Unemployment Insurance (UI) is a national program administered by the US Department of Labor and provides temporary payments to people who are unemployed through no fault of their own. Although UI is a joint state-federal program to help unemployed individuals, employers in New Mexico must contribute to state unemployment insurance. You can manage your New Mexico unemployment insurance through an easy-to-use online portal.

The unemployment tax rates in New Mexico are determined by several factors, including the employer's industry and experience. Here’s a breakdown of the rates:

• New employers: The rate is based on the average industry rate or 1%, whichever is greater. For instance, new employers in Agriculture, Forestry, Fishing, and Hunting face a rate of 1.16%, while those in Public Administration have a rate of 1.25%.
• Experienced employers: These rates are calculated based on the employer’s benefit ratio, reserve factor, and experience history factor. The reserve factor for 2024 is 3.4528.

For more information on paying your unemployment insurance, the New Mexico Department of Workforce Solutions provides multiple resources, including updates to regulations and an employer activation guide. 

Withholding personal income tax from your New Mexico employee

Personal Income Tax, also known as individual income tax or state income tax, is a tax on the income of New Mexico residents. The tax is deducted from the employee’s wages and is withheld by the employer. After you withhold the tax from your employee, you are responsible for paying the amount you withheld to the state. You can pay the withheld amount through New Mexico’s Taxpayer Access Point online portal.

The withholding amounts are determined using the New Mexico State Wage Withholding Tables provided in FYI-104, which consider the allowances claimed on the federal W-4 form and the frequency of wage payments.

For more information on paying the withholding amount, the New Mexico Tax and Revenue Department provides breakdowns explaining how much employers should withhold and the forms employers will need to complete.

Paying your New Mexico workers’ compensation

On top of paying your New Mexico payroll taxes, you will also need to pay for workers’ compensation in the state. Workers’ compensation is insurance to provide care for an employee who gets injured while performing their job. Employers are required to pay for workers’ compensation in New Mexico even if you only have one employee living there.

Businesses can purchase workers’ compensation insurance from a qualified commercial carrier in the state. The New Mexico Worker’s Compensation Administration explains the three types of coverage offered in the state and resources to help you find a qualified commercial carrier.

New Mexico also requires you to pay a workers’ compensation assessment on top of the premiums you pay for your workers’ compensation to your private insurance carrier, which you can learn more about on the Worker’s Compensation Administration website. You can pay the workers’ compensation assessment through New Mexico’s Taxpayer Access Point.

Please be sure that you verify that your workers’ compensation insurance is compliant with the state’s regulations for workers’ compensation.

Workers' compensation tax rate in New Mexico

In New Mexico, the workers' compensation tax rate is structured as a quarterly assessment fee of $4.30 per employee. This fee is divided as follows: $2.30 from the employer, $2.00 from the employee, and $0.30 allocated to the Uninsured Employers' Fund.

By understanding and adhering to these guidelines, employers can ensure compliance with New Mexico's payroll tax requirements, thereby avoiding penalties and ensuring a smooth payroll process.

Payroll tax due dates in New Mexico

The following table outlines the key due dates for payroll tax submissions in New Mexico:

Submission process for payroll taxes in New Mexico

Employers must adhere to specific guidelines when submitting payroll taxes in New Mexico:

• Income and withholding taxes: Employers should use the New Mexico State Wage Withholding Tables in FYI-104 to calculate the correct withholding amounts. The income and withholding information returns must be reported to the Department by the last day of February each year
• Workers' compensation: Employers must pay a quarterly assessment fee of $4.30 per employee, with contributions split between the employer ($2.30) and the employee ($2.00). An additional $0.30 per employee goes to the Uninsured Employers' Fund

Simplify US payroll tax compliance with Deel

While this guide provides essential information on New Mexico payroll taxes, payroll compliance and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel. 

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.