New York City has implemented a personal income tax rate change starting September 1, 2010. Method II, Exact Calculation Method, has changed. The New York City personal income tax rate change affects wages of $500,000.00 and more. Supplemental wages (bonuses, commissions, overtime pay, etc.) withholding rate for New York City will be 4.75% effective September 1, 2010.

Employers using the wage bracket tables (Method I) or dollar to dollar withholding tables will continue to use the New York City tables contained in Publication NYS-50-T. The exact calculation method (Method II) tables have changed and are included in NYS-50-T.2 replacing pages T-39, T-40 and T-40-A in NYS-50-T.

The New York State personal income tax rates, Yonkers resident personal income surcharge tax rate, and Yonkers nonresident earnings tax rate have not changed. Employers should continue to use the methods in Publications NYS-50-T and NYS-50-T.1 to determine the amounts to be withheld for these taxes.

Steps for computing the amount of tax to be withheld using Method II Exact Calculation Method and tax tables published in NYS-50-T.2. The following steps are a generic outline to guide you through the process of using the table with your payroll information:

Step 1: Locate the table on this page for the appropriate payroll period. Find the line on which the net wages fall between the amounts in Columns 1 and 2.

Step 2: Following across on the line you found in Step 2, subtract the amount in Column 3 from the net wages.

Step 3: Following across the same line, multiply the result from Step 3 by the amount in Column 4.

Step 4: Following across on the same line, add the result from Step 4 to the amount in Column 5. The resulting sum is the amount to withhold from wages.

See page T-40-A for withholding calculation examples using Method II.

New York City Method II Exact Calculation Method Example

Example: Weekly Payroll, $1000 gross wages, single, 1 exemption

1. Amount from Table A on page T-38 is $115.40 for single, weekly payroll, 1 exemption. $1000.00 wages - $115.40 = $884.60 net wages

2. Use Table II-A on page T-39 for single, weekly payroll. Look up $884.60 and use line 5 on which $884.60 is greater than Column 1 ($481.00) but less than Column 2 ($1154.00).

3. $884.60 - $481.00 (from Column 3, line 5) = $403.60

4. $403.60 x .0390 (from Column 4, line 5) = $15.74.

$15.74 + $14.15 (from Column 5, line 5) = $29.89. Withhold this amount.

Find detailed information and New York City personal income tax rate tables online at the New York State Department of Taxation and Finance website or see Publication NYS-50-T, Publication NYS-50-T.1 or Publication NYS-50-T.2.

New York employers required to withhold New York City personal income tax may find that tax rate changes complicate the payroll process, consume time and energy. A practical New York City payroll solution would be to utilize payroll software. Payroll software which automatically updates tax tables and automatically computes withholdings would be an invaluable asset to any company. Feel peace of mind computations, payroll reports and tax forms (federal and state) are correct.

New York City employers can save precious time and resources by using NY payroll software, Payroll Mate, to automatically calculate federal, New York State and New York City personal income taxes. With up to date tax tables this comprehensive payroll program is an inexpensive solution to all small business owner’s payroll situations.