Updated: November 14, 2023
The Land of Enchantment is an amazing place to live and run a small business. But whether you own a luxury spa in Santa Fe or the place with the best green chile in Las Cruces, you and 150,000 other New Mexico small business owners all have payroll taxes to take care of.
That’s what we’re here for. We designed an easy payroll calculator to ease your payroll tax burden. All you have to do is enter wage and W-4 information for each of your employees, and the calculator will do the rest. It will calculate gross pay, take out deductions, and come up with the net pay you’ll need to write your employees’ paychecks.
Federal payroll taxes for New Mexico employers
First and foremost, we need to give Uncle Sam his due. Below is a quick overview of what you need to know when you’re calculating federal payroll tax withholdings. If you would like to get into each calculation in detail, we invite you to check out our step-by-step guide.
- Calculate Gross Wages:
- For hourly employees, multiply their hours worked by their pay rate. Don’t forget to pay the higher rate for any overtime hours worked.
- For salaried employees, divide each employee’s annual salary by the number of pay periods your business has.
- Bonuses, commissions, and tips are all part of gross wages as well.
- Subtract Pre-Tax Deductions:
- If your employees contribute to 401(k), FSA, HSA, or any other pre-tax withholding accounts, subtract their contributions from gross pay prior to applying payroll taxes.
- Deduct Federal Income Tax:
- This is the big enchilada, the biggest tax that your employees will pay. Federal income tax rates go all the way up to 37%, depending on the tax bracket that your employees are in. We won’t get into the nitty-gritty here, but you can find further withholding information through the IRS Publication 15-T.
- Deduct (and Match) FICA Taxes:
- Social Security Tax: Withhold 6.2% of each employee’s taxable wages up until they reach total earnings of $160,200 for 2023. Any earnings above $160,200 are exempt from Social Security Tax. As an employer, you will also need to pay this tax by matching your employees’ tax liability dollar-for-dollar.
- Medicare Tax: Withhold 1.45% of each employee’s taxable wages up until they have reached total earnings of $200,000 for the year. You as the employer will also need to match this tax liability dollar-for-dollar. However, for salaries above $200,000, employees need to pay what’s called an Additional Medicare Tax. The rate for this additional tax is 0.9%, which makes the total 2.35%. Only the employee is responsible for paying the Additional Medicare Tax, not the employer.
- Pay FUTA Unemployment Tax:
- You will need to pay 6% of the first $7,000 of taxable income for each employee per year, which makes your maximum FUTA tax obligation per employee per year come out to $420. Note that if you pay state unemployment taxes in full and on time, you are eligible for a tax credit of up to 5.4%, making your FUTA tax rate effectively 0.6%. FUTA tax is the sole responsibility of the employer. Your employees are not responsible for paying this tax.
- Subtract Any Post-Tax Deductions:
What are New Mexico payroll taxes?
Now that we’re done with federal income taxes, let’s move on to New Mexico state taxes. The state has a progressive income tax, broken down into four tax brackets ranging from 1.7% on the low end to 5.9% on the high end, which is still on the lower end compared to the rest of the country.
New Mexico state unemployment insurance (SUI)
As an employer, you’re responsible for paying SUI (remember, if you pay your state unemployment tax in full and on time, you get a whopping 90% tax credit on your FUTA tax bill).
New Mexico’s SUI rates range from 0.33% to 6.4%. The taxable wage base in 2023 is $30,100 for each employee, up from $28,700 in 2022.
If you are a new small business owner (congratulations, by the way!), your rates range between 1% – 1.06%.
More information for new employers is available per industry here.
New Mexico workers’ compensation fee
Both employees and employers are required to pay a Workers’ Compensation Fee.
- The fee for the employer is $2.30 per employee per quarter.
- The fee for employees is $2.00 per quarter.
More details on the Workers’ Compensation Fee can be found here.
Cut That Check!
Give yourself a pat on the back! You’ve checked “payroll taxes” off your to-do list so you can move onto the important things like growing your small business. Once each employee’s net pay is calculated (taking deductions and withholdings into consideration), you’re well on your way.
All you have to worry about is getting your employees paid on time as well as setting aside whatever you owe in FICA, unemployment taxes, and worker’s compensation. Those numbers can add up quickly if you don’t account for them.
You will need to use Form 941 to file federal taxes quarterly, and Form 940 to report your annual FUTA tax. You can pay taxes online using the EFTPS payment system. More information about employment tax due dates can be found here.
Additional New Mexico payroll tax resources:
Our calculator is here to help, but of course, you can never learn enough, especially when it comes to payroll taxes. Here are some additional resources and contact information to help you run payroll:
More helpful payroll calculators that New Mexico employers can try
New Mexico employers can use the calculator at the top of this page to quickly calculate their employees’ gross pay, net pay, and deductions in a few clicks. But sometimes a company needs to do a little more math before they can cut staff paychecks. For example, do you own a business where employees get tips from customers? Remember that you are responsible for withholding taxes from your employees’ paychecks based on the tips they receive. Additionally, if an employee leaves for another employer, you’ll need to calculate their final pay. So, if you need a little more help with the number-crunching, check out some of the calculators below.