Form IT-226: Employer Compensation Expense Program Wage Credit (Tax Year 2025)

Form IT-226 is a New York State tax form tied to the Employer Compensation Expense Program (ECEP), a payroll tax structure that some New York employers opt into. If your employer participates in ECEP, part of your wages gets taxed at the business level through the Employer Compensation Expense Tax (ECET) instead of through your regular state withholding. Form IT-226 is how you, as the employee, claim the credit that offsets this arrangement on your personal New York State income tax return.

The New York State Department of Taxation and Finance issues this form each year, and the version discussed here applies to tax year 2025. It comes as a fillable PDF (AcroForm), meaning you can type your information directly into the document on a computer before printing or attaching it to your e-filed return, rather than filling it out by hand.

Who Needs Form IT-226

You need this form only if your employer has elected to participate in the Employer Compensation Expense Program. Under ECEP, employers with employees earning over $40,000 annually can choose to pay an additional payroll tax on the compensation above that threshold. In exchange, affected employees receive a corresponding wage credit on their state income tax return so they aren’t effectively taxed twice on the same income.

If your employer isn’t enrolled in ECEP, this form doesn’t apply to you at all. Most New York taxpayers will never encounter Form IT-226, since ECEP participation by employers has remained limited since the program was introduced. Check your wage statement or ask your payroll department if you’re unsure whether ECET was withheld on your behalf.

When You Use It

You file Form IT-226 along with your New York State personal income tax return for the year in which your employer paid ECET on your covered wages. The form calculates the wage credit amount based on the compensation subject to the employer tax, and that credit reduces your personal income tax liability dollar for dollar. It’s meant to prevent double taxation of the same wages under two different tax mechanisms.

Employers are responsible for reporting the ECET they’ve paid on behalf of each employee, and that information should flow through to you so you can complete the wage credit calculation accurately. If you switch jobs mid-year or only work part of the year for an ECEP-participating employer, the credit is prorated to reflect the portion of wages actually subject to the employer tax.

How to Get and Complete the Form

Form IT-226 is available directly from the New York State Department of Taxation and Finance website as a fillable PDF. Because it’s an AcroForm, you can open it in most PDF readers, type in your figures, and save a copy for your records before submitting it with your return. The form asks for basic identifying information along with the wage and tax figures your employer should have supplied.

It helps to have your final pay statement or year-end wage summary on hand before starting, since the credit calculation depends on exact compensation figures reported by your employer under the program. If numbers don’t match what you expect, contact your employer’s payroll office before filing rather than guessing at the amounts.

Taxpayers dealing with unusual New York State credits or exclusions often run into related forms during the same filing season. For instance, those with disability-related income adjustments may also need to look at Form IT-221 for the disability income exclusion, and taxpayers connected to certain innovation-focused businesses should review Form IT-223 covering the innovation hot spot deduction. Both deal with narrow situations much like IT-226, where only a specific subset of filers will actually need the paperwork.

If you ever run into a dispute with a state tax agency that a standard form doesn’t resolve, it’s worth knowing that other states offer dedicated advocate channels too — California’s FTB Form 914 taxpayer advocate request is one example of how these processes work outside New York.

Keep a copy of the completed IT-226 along with your full tax return in case the Department of Taxation and Finance requests supporting documentation for the wage credit later on.