New Jersey Withholding laws & compensation compliance analysis

New Jersey Withholding: What you need to know

New Jersey law requires employers to withhold state income taxes from wages paid using the percentage method formula or withholding tables provided by the state Division of Taxation. Salaries, wages, tips, fees, commissions, and bonuses are subject to withholding (NJ Rev. Stat. Sec. 54A:7-1).
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State law requires New Jersey employers to withhold state income tax from wages paid to employees who are New Jersey residents unless:
• The income is earned completely out of state.
• The employer withholds another state's income tax.
• The other state's tax withholding is equal to or greater than the New Jersey withholding.
New Jersey employers must withhold taxes on all income earned in New Jersey by nonresidents. There is an exception for residents of Pennsylvania who file “Certificates of Nonresidence.” New York residents are subject to New Jersey withholding.
Generally, employee compensation that is considered wages for federal income tax purposes is subject to New Jersey withholding. This includes salaries, wages, tips, fees, commissions, bonuses, and other remuneration received for services rendered. Also subject to withholding are compensation paid under an accident or health insurance plan, employer contributions to retirement plans other than 401(k) plans, 401(k) contributions exceeding the federal limit, and amounts an employee takes out of a cafeteria plan.
Cafeteria plans. Contributions to cafeteria or flexible benefits plans provided under a salary reduction agreement are generally taxable as wages for New Jersey purposes. The value of a cafeteria plan benefit is excludable from New Jersey gross income if all the following ...

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New Jersey Withholding Resources

Type Title
Forms Employer's Quarterly Federal Tax Return (941 Form)
See all Withholding Resources