NJ Income Tax – Withholding
Generally, when someone works for you and that person is considered to be your employee for federal income tax purposes, he or she is also your employee for New Jersey Income Tax purposes.
Employee compensation, including salaries, wages, tips, fees, commissions and bonuses are subject to New Jersey Income Tax withholding. In most cases, compensation that is considered wages for federal income tax purposes is subject to New Jersey withholding. There are, however, benefits that are not subject to federal withholding that are subject to withholding in New Jersey.
As a New Jersey employer, you are required to withhold New Jersey Income Tax from wages paid to all State residents unless you are withholding another jurisdiction's income tax at a rate equal to or greater than New Jersey's rate. You must also withhold New Jersey income tax for nonresident employees physically working in this State. Under a Reciprocal Income Tax Agreement, Pennsylvania residents are the only out-of-state residents exempt from New Jersey withholdings. Compensation earned in New Jersey by a Pennsylvania resident is not subject to New Jersey Gross Income Tax. If you employ a Pennsylvania resident in New Jersey, that employee should complete an Employee's Certificate of Nonresidence in New Jersey (Form NJ-165
and file it with you. Once an employee has provided you with a completed Certificate of Nonresidence, you must stop withholding New Jersey income tax.
To determine the amount of New Jersey Income Tax to be withheld from employees' wages, use the withholding tables or percentage methods contained in the New Jersey Gross Income Tax Instructions for Employers (Form NJ-WT
and Supplemental Withholding Tables (Form NJ-WT Supplemental
Withholding Requirement for Payments to Contractors
Beginning January 1, 2018, any person (other than a governmental entity, a homeowner, or a tenant) who maintains an office or transacts business in New Jersey is required to withhold New Jersey Gross Income Tax at the rate of 6.625% from payments made to unregistered, unincorporated contractors for services performed in this State. See Withholding Requirements for Construction Contractor Services
Electronic Filing Mandate
The Division of Taxation is implementing mandatory electronic filing for all employer year-end filings and statements (Forms NJ-W-3, W-2, W-2G, 1099-MISC, 1099-R, 1094/1095, etc.). See the Mandate Notice for more information.