NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A4721
SPONSOR: Burdick TITLE OF BILL:
An act to amend the labor law, in relation to the election to have
federal and/or state income tax deducted and withheld from an individ-
ual's unemployment insurance benefits
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this legislation is to increase the rate of state income
taxes withheld from an individual's payment of unemployment benefits.
SUMMARY OF PROVISIONS:
Section 1 amends subdivision 6 of section 596 of the labor law to
increase the, rate of state income tax withholding deducted and withheld
from. an individual's payment of unemployment benefits if the individual
elects to do so. Additionally, an individual who files for unemployment
benefits must be advised that even if they elect to have income taxes
deducted and withheld from their unemployment benefits, additional tax
may still be due.
Section 2 sets the effective date.
JUSTIFICATION:
When an individual files a claim for unemployment benefits, they may
elect to have federal and/or state income tax deducted and withheld from
the payment of the benefits. The federal rate deducted and withheld is
equal to the lowest effective federal tax rate, 10%. However, although
the lowest state effective tax rate is 4%, the New York State rate of
tax deducted and withheld from benefits is 2.5%. This means that the
current rate of taxes withheld from unemployment benefits for New York
State would not be enough to cover the taxes due for those in the lowest
taxable income bracket ($0 to $8,500).
This exact situation was especially prevalent during the pandemic when
thousands of New Yorkers already facing joblessness were then also hit
with unexpected tax bills at a time when they were ill equipped to pay
them. This exacerbated their already dire financial situations by possi-
bly subjecting those on unemployment to interest and penalties if the
taxes were not paid when due. This legislation combats this situation as
it raises the rate of New York State taxes withheld from unemployment
benefits if elected from 2.5% to 4%. In addition, the legislation
requires that an individual filing for unemployment is notified that
even if they elect to have taxes withheld, they may still have an addi-
tional tax liability.
LEGISLATIVE HISTORY:
2021-22: A9462 (WALLACE) Referred to Ways and Means
2023-2024: A1573 (WALLACE) Referred to Labor
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
This act shall take effect immediately.
