New Jersey Withholding laws & HR 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.
Taxes generally must be withheld on “wages” as defined by the federal Internal Revenue Code. Employee compensation, including salaries, wages, tips, fees, commissions, and bonuses, are subject to New Jersey gross 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 but are subject to withholding in New Jersey. For New Jersey Gross Income Tax purposes, the value of any employer-provided accident/health plan coverage or reimbursements for an employee's child under the age of 27 that is excluded from the employee's federal income is also excluded from the employee's New Jersey income under the Division of Taxation's ...

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