Recently NYS has provided some guidelines regarding the new Employer Compensation Expense Program (ECEP). Under the ECEP eligible employers can make a voluntary election to pay an additional tax, the Employer Compensation Expense Tax (ECET) on all employee’s New York wages that exceed $40,000 during the year. It is strictly a voluntary tax and employers must make the election on line by December 1, 2018 in order to enroll in this program beginning with the 2019 calendar year. Shareholder employees are also eligible to have the ECET paid on their behalf.
NYS developed this initiative to help mitigate the effects of the limited State & Local Tax Deduction that now exists at the federal level as a result of the Tax Cuts and Jobs Act. The employer receives a deduction for the ECET paid and it is treated as other payroll taxes. The employee in turn is eligible for a credit on his/her NYS personal income tax return for the ECET paid on his/her behalf. The credit at the employee level is almost dollar for dollar.
In 2019, this additional payroll tax will be calculated at 1.5% of each employee’s NY wages over $40,000. Please note that the tax rate under this program will increase to 3% in 2020 and 5% in 2021 and forward. Tax payments will be due on a quarterly basis and coincide with the regular income tax withholding filing requirements (April 30, July 31, October 31 and January 31). All returns and payments must be filed and paid on-line. An employer may not deduct or withhold from an employee’s wages any portion of the ECET paid. There are no credits available to the employer to offset the tax liability.
For more information, consult your Janover Tax Advisor.