Withholding Tax and Workers Compensation
Registration
Employers must register with the Taxation and Revenue Department in order to file.
For more information on registering a business see Who must register a business?
Withholding
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. Wage withholding is filed Form TRD-41414, Wage-withholding Tax Return located below.
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 non-resident employees; income earned from active-duty military service; and 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 the individual is enrolled and lives.
Definitions to be aware of:
- “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 Tax Rates to determine the proper amount to withhold.
Reporting Tax Withheld
Income and withholding information returns are generally required to be reported to the New Mexico Taxation and Revenue Department (Department) by the last day of February. For more information, see the WWT forms below or the FYI-330 Income and Withholding Information Returns and Filing Methods.
Non-Wage Withholding
The non-wage withholding tax return is for individuals who withhold New Mexico withholding tax from payments for pensions and annuities, gambling winnings, or some other purpose that does not include wages paid to employees. Non-wage withholding is filed on Form TRD-41409, None-Wage-withholding Tax Return located below.
Workers’ Compensation
Every employer who elects or is required to be covered by the Workers’ Compensation Act, and every employee covered by the Workers’ Compensation Act, is assessed a fee for funding the administration of the Workers’ Compensation Administration (Section 52-5-19 NMSA 1978). The Taxation and Revenue Department collects the fee paid using the Form TRD-41431, Workers’ Compensation Fee Return and Employees’ Quarterly Wage and Withholding Report.
Any additional questions can be answered by the Workers’ Compensation Administration.
This fee is not the same as the workers’ compensation insurance premium. Paying the fee does not mean that the employer has workers’ compensation insurance coverage. The employer must obtain a workers’ compensation insurance policy. Unemployment Insurance is filed with the New Mexico Department of Workforce Solutions.
Fee Amount
Employer
- prior to July 1, 2025, $2.30;
- beginning July 1, 2025 and prior to July 1, 2028, $2.55;
- beginning July 1, 2028 and prior to July 1, 2033, $2.68; and
- beginning July 1, 2033, $2.80.
Employee
- prior to July 1, 2025, 2.00;
- beginning July 1, 2025 and prior to July 1, 2028, $2.25;
- beginning July 1, 2028 and prior to July 1, 2033, $2.38; and
beginning July 1, 2033, $2.50.