June 13, 2018
New Mexico revised 2018 withholding tables released for use by employers as soon as possible
The New Mexico Taxation and Revenue Department has released revised 2018 wage-bracket and percentage method tables for state income tax withholding. The withholding tables have been revised due to the passage of the federal Tax Cut and Jobs Act (TCJA) in late 2017. The supplemental withholding rate remains at 4.9%. (Publication FYI-104, New Mexico Withholding Tax, retroactively effective January 1, 2018.)
According to a representative of the Department's Policy Section, employers should start using the new revised withholding tables as soon as possible. The Department is not requiring employers to amend prior withholding for the first half of 2018.
See the Attachment for the annual percentage method, with changes to the wage ranges.
Cautionary note about Form W-4 used for New Mexico income tax withholding
New Mexico continues to use federal Form W-4 for state income tax withholding purposes. There is no state specific withholding allowance certificate. The Department does note, however, that due to changes in federal law, state income tax liability is not reduced based on personal allowances claimed by New Mexico taxpayers. Further, although the federal standard deduction amount was increased for all taxpayers, the New Mexico income tax liability for 2018 will likely increase for households with two or more dependents.
As a result, the revised New Mexico withholding tables are updated to reflect the federal changes by limiting the withholding allowance exemption to no more than three. Employees with more than three allowances may see an increase in their state income tax withholding as a result of the changes to federal law. Even after these changes, there is an increased likelihood that such households will be under-withheld for New Mexico income tax purposes. Employees claiming more than three allowances may want to submit a revised Form W-4 to their employer, reducing the allowances they claim for New Mexico income tax withholding purposes to three or fewer.
If the federal withholding is calculated using a flat percent, a flat 4.9% (no change) of the supplemental wage or fringe benefit amount should be withheld for New Mexico state income tax withholding purposes. The same method used for calculating federal withholding on irregular or supplemental wages should be used for state withholding. An employer that uses the cumulative method of withholding for federal withholding may use this same method for state withholding. In the case of a married employee who has elected to be withheld at the higher single rate for federal purposes, the single rate for New Mexico state withholding purposes must also be used.
All employers must file Forms W-2 by January 31
As we reported previously, recently enacted New Mexico legislation will require all employers to file Forms W-2 with the Department by an accelerated deadline of January 31. Employers filing 25 or more Forms W-2 will be required to file electronically. The bill is effective for taxable years on or after January 1, 2019 and applies to Forms W-2 filed in 2020. (HB 276, Chapter 59, signed by the governor on March 2, 2018; EY Payroll NewsFlash Vol. 19, #062, 3-14-2018; email response to inquiry.)
Current law requires employers to file Forms W-2 with the Department by February 28 only if quarterly withholding or unemployment tax returns are not filed by the employer. Applicable employers that file 50 or more Forms W-2 are required to file electronically.
The new requirement also applies to payers of pensions and annuities that withhold New Mexico state income tax from such payments.
For more information on state withholding tax and the current requirements for filing Forms W-2 with the Department, go here.
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