Wage Withholding Tax 

Employers must withhold a part of the employee’s wages for payment of income tax. New Mexico bases its withholding tax on an estimate of an employee’s State income tax liability. The State credits taxes withheld against the employee's actual income tax liability on the New Mexico personal income tax return. State withholding tax is like federal withholding tax.

Who Must Withhold

An employer who withholds a portion of an employee's wages for payment of federal income tax must withhold state income tax. This includes employers of some agricultural workers. There is a limited exception for certain nonresident employees.

Also exempt from withholding tax is income wholly earned by a Native American member of a New Mexico federally recognized Indian nation, tribe or pueblo on the lands of the nation, tribe or pueblo where he or she is enrolled and lives.

The income earned from active-duty military service is also exempt from withholding requirements.

"Employer" is defined in Section 7-3-3 NMSA 1978. In general, "employer" means a person doing business in the state or deriving income from state sources who pays wages to an employee for services performed.

"Employee" is defined in Section 7-3-3 NMSA 1978. In general, "employee" means a New Mexico resident who performs services either within or without the state for an employer. It also includes nonresidents who perform services within the state for an employer.

"Wages" is defined in Section 7-3-3 NMSA 1978. In general, "wages" means payment in cash or other form for services performed by an employee for an employer.

Amount to Withhold

The amount of tax withheld may vary depending on how many allowances an employee claims on the federal W-4 form and how often wages are paid. Employers should refer to the New Mexico State Wage Withholding Tables located in the FYI-104 to determine the proper amount to withhold.
 

Links

FYI-104: New Mexico Withholding Tax
FYI-107: Individual Withholding Guide
For Employees Concerning Withholding Tax
Withholding Tax Rates
Gross Receipts Tax
Worker's Compensation Fee
Oil and Gas Proceeds Withholding Tax
Pass-Through Entity Withholding Tax

 

Frequently Asked Questions

Q. As an employer must I submit an annual report of New Mexico withholding tax paid and reported during the tax year?

Answer:
No, but you may choose to complete and submit to the Taxation and Revenue Department (TRD) Form RPD-41072, Annual Summary of Withholding Tax for CRS-1 Filers . That form reconciles the total amounts withheld on the annual statement of withholding information returns given to withholdees (Federal forms W-2, W-2g, 1099-R) with the total tax withheld and paid to New Mexico on Form RPD-41072, Annual Summary of Withholding Tax for CRS-1 Filers .

Q. Does New Mexico have a state version of the federal W-4 form?

Answer:
New Mexico does not have a form equivalent to the federal Form W-4. For New Mexico withholding tax, you should use a federal W-4 and write across the top of that form: "For New Mexico Withholding Tax Only." Retain it in your files for reference.

Q. Must a business located outside New Mexico report and pay New Mexico withholding tax for an employee who lives in New Mexico but works in another state?

Answer:
An employer is not required to report and pay New Mexico withholding tax for a New Mexico resident employee unless the employer has income from activity or sources in New Mexico. The employer may choose to report and pay such tax as a courtesy upon the employee's request, however, since that employee may be liable for New Mexico personal income tax.

Q. We are a company located outside New Mexico. We are sending employees, who are not New Mexico residents, to work a job in New Mexico for one week. Do we have to pay and report New Mexico withholding tax for them?

Answer:
No. Employees who are not New Mexico residents are exempt from New Mexico withholding tax unless they work in this state for more than 15 days during the calendar year.

Q. I have questions on New Mexico unemployment tax. Whom do I contact?

Answer:
TRD does not administer New Mexico unemployment taxes. For information on this tax program, please contact the Department of Workforce Solutions
  • Message from the Secretary
    Thank you again for making the 2012 tax-filing season a success. Largely because of your efforts, we were able to process nearly $260 million in personal income tax refunds in a timely and efficient fashion with very few errors. Read More     ​

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