2023 New Mexico household employment tax and labor law guide - Care.com HomePay

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2023 New Mexico household employment tax and labor law guide

Household employment requirements for families hiring a caregiver in New Mexico

2023 New Mexico household employment tax and labor law guide

Families in New Mexico have a unique set of tax, payroll and HR-related rules to follow when they hire a household employee. That’s why we’ve combined all the state and federal tax and labor law information you’ll need! Check out the information below that HomePay is here to help with.

Checklist for New Mexico household employers

We know you’re busy so here’s a quick “to-do” list with links to extra details below.

Beginning of employment 

During employment 

Optional benefits for your employee

Ending employment

Beginning of employment 

Set up EIN & state tax account(s)

You must first apply for a EIN (Employee Identification Number) with the IRS. This will be used as your unique ID with both state and federal tax authorities. Then you can open an account with your state taxing authority.

Workers’ compensation

Household employers in New Mexico are not required to get coverage for workers’ compensation insurance, however we recommend obtaining coverage. These policies pay for medical expenses and lost wages if an employee has a work-related injury or illness. Obtain an instant quote and purchase a policy online, or contact our partner, Clarke White, at 804-267-1210 or wcnanny@allrisks.com.

Employment posters 

Families in New Mexico are required to notify their employee of their rights by sharing these posters.

During employment 

File returns, remit taxes and manage correspondence

  • File state employment tax returns throughout the year and remit state employer and employee taxes.
  • Remit federal employer and employee taxes via 1040-ES estimated tax payment voucher four times each year.
  • Each year end, prepare Schedule H and file with Form 1040; prepare and distribute Form W-2 to each employee; file Form W-2 Copy A/Form W-3 with the Social Security Administration (SSA).
  • Manage ongoing alerts and notices from the state (tax rates and labor law is subject to change at any time.

Minimum wage rates

  • New Mexico state: $12.00/hour
  • Santa Fe city rate: $12.32/hour

Note: Whenever more than one rate applies, employers are required to pay the higher rate.

New Mexico overtime requirements

  • Live-out employees must be paid 1.5x their hourly rate for all hours worked over 40 in a workweek.
  • Live-in employees are not required to be paid overtime. 
  • Overtime is not required to be paid when work is performed on a holiday. 

Paid sick leave

Household employers in New Mexico are required to provide up to 64 hours of paid sick leave to their employees each year. Other details of this law are as follows:

  • Sick leave accrues at 1 hour for every 30 hours worked unless employers wish to allow all 64 hours upfront at the beginning of the year.
  • Employees can use sick leave for mental or physical medical appointments, medical conditions related to pregnancy or childbirth, illness, injury, or to deal with legal or family issues relating to employee or family members.
  • Up to 64 hours of unused sick time can roll over to the next year.
  • Employers are not required to pay out unused paid time off if their employee is terminated. However, if the employee comes back to work within a 12 month period, any unused paid time off must be reinstated unless the employer chose to pay it at the time of termination.
  • Employers should keep paid time off records for 4 years.
  • Employers are required to provide employees this poster to make them aware of their rights.

Optional benefits for your employee 

Health insurance

Families with only 1 employee can make contributions toward their employee’s health insurance premiums and treat the amount as non-taxable compensation. In this scenario, neither the employee nor the employer are required to pay any taxes on that portion of the compensation.

Families with 2 or more employees have 3 options:

  1. Set up an Individual Coverage Health Reimbursement Arrangement (ICHRA).
  2. Set up a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).
  3. Purchase a policy through SHOP (Small Business Health Options Program). 

Visit our health insurance page for more information about these options.  

Mileage reimbursements

The current federal mileage reimbursement rate is 65.5 cents per mile and only covers miles driven by your employee while on the job. Miles driven commuting are not eligible for reimbursement.

Ending employment 

Termination notice requirement

Household employers in New Mexico are required to provide their employee with a termination notice that explains their right to unemployment benefits. The notice should be provided when the employee is let go.

Managing unused PTO 

New Mexico household employers do not need to pay their employees for unused sick and/or vacation time.

Close down your state employment tax account(s)

The state tax agencies expect you to file timely returns for as long as your tax accounts are open — even to report $0 in wages paid.

Maintain payroll records

Household employers are required to keep wage records on file for at least three years.

The information contained in this article is general in nature, may not be applicable to your specific circumstances, and is not intended to be a substitute for or relied upon as personalized tax or legal advice.

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