Withholding Taxes: New Mexico

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert, The Payroll Advisor

Summary

• A New Mexico employer is required to withhold New Mexico income tax from all wages earned by New Mexico resident employees regardless of the employees' work location. For residents who work partly in another state, New Mexico law allows a credit for the other state's income tax. Employers need only withhold from the wages of nonresident employees if they work more than 15 days in New Mexico. See Withholding on Residents, Nonresidents and Expatriates.
• New Mexico employers determine withholding using each employees' federal Form W-4 labeled For New Mexico State Withholding Only. Nonresident military spouses may be able to claim exemption from New Mexico income tax withholding. See Employee Withholding Forms.
• New Mexico follows the federal rules regarding withholding on supplemental wage payments, such as bonuses. See Supplemental Wages.
• Employers are required to provide certain information to employees on an annual basis on Form W-2, Wage and Tax Statement. See Form W-2 Requirements.
• New Mexico employers must keep all records that would allow a determination of the correct tax liability. See Recordkeeping Requirements.