September 30, 2020
New York releases proposed New York State and Yonkers 2021 withholding tables; Form IT-2104 could be revised
The New York Department of Taxation and Finance released proposed regulations that include revised wage bracket and percentage method income tax withholding tables for New York and Yonkers, effective with wages paid on or after January 1, 2021.
The Yonkers nonresident earnings tax rate would remain at 0.50% for 2021.
Once the proposed regulations are finalized, the updated wage bracket and percentage method withholding tables for 2021 should be posted here (replacing the 2020 versions of these publications).
New York will continue incrementally reducing certain state income tax ratesthat began in 2018
The New York State fiscal year 2021 budget legislation provided that despite the financial drain of the COVID-19 emergency on the state's budget, the personal income tax rate reductions that began in 2018 under Chapter 60 of the Laws of 2016 (Part TT) will continue. (News release governor's office; New York Department of Taxation and Finance June 2016 Summary of SFY 2016–2017 provisions.)
The 2020 New York State and Yonkers personal income tax rate schedules were revised for the third consecutive year to reflect the income tax rate reductions enacted under Chapter 60. The law continues to be phased in beginning for tax year 2018 and ending in tax year 2025, after which point the new income tax rates will be made permanent.
When fully phased in:
Computing state allowances
New York Form IT-2104, Employee's Withholding Allowance Certificate, for use by New York, Yonkers and New York City employees, will likely also be revised effective January 1, 2021, to account for the adjustments to the personal income tax rate schedules and calculations. Once released, the form will be available here. Note that New York still uses withholding allowances in the computation of state income tax withholding, and it is recommended that employers have new employees submit state Form IT-2104.
The instructions contained in the proposed regulations for determining New York withholding allowances state that if the federal Form W-4 most recently submitted to an employer was for tax year 2019 or earlier, and the employee did not submit state Form IT-2104, the employer may use the same number of federal allowances the employee claimed on their federal Form W-4. For employers that elect to use the federal allowance amounts in computing wages after allowances, Table D should be used to make the correct adjustments for the difference between the federal allowance and the New York State calendar year allowance of $1,000 according to the particular payroll period.
Because withholding allowances are no longer reported on federal Form W-4, if the employee submits a federal Form W-4 to an employer for tax year 2020 or later, and the employee does not submit state Form IT-2104, the employer may use zero as the number of federal allowances. To correct for the lower New York State withholding allowances, multiply the amount on Table D for one allowance by the number of allowances claimed. Add the product to the federally computed wages after allowances.
The proposed regulations do not include changes to the supplemental withholding rates for New York
and Yonkers for 2021. The Department typically includes these figures in its annual release of Publications NYS-50-T-NYS, New York State withholding tax tables and methods, and NYS-50-T-Y, Yonkers resident and nonresident withholding tax tables and methods.
For more information on New York and Yonkers withholding tax, see the Department's website.
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