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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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Could anyone clarify what this means for NJ Tax Law: "where

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Could anyone clarify what this means for NJ Tax Law: "where it is expected that a non-resident employee will work only a short period of time within this state and it is reasonably expected that his total wages will not exceed personal exemptions, employer need not withhold or deduct any amount from employees wages until aggregate amount paid equals or exceeds the exemptions" If we as an out of state employer have employees in NJ for temporary projects (3-4 days) who are non-residents do we have to withhold on their NJ income or their resident state?


Lev :

Hi and welcome to our site!
You sited regulation for employers that allows not to withhold state income tax from wages when nonresident employees are working only for a short period.


http://www.state.nj.us/treasury/taxation/pdf/current/njwt.pdf
The amount of personal exemption in NJ is $1000 - - http://www.state.nj.us/treasury/taxation/njit2.shtml
Thus if total wages paid to a nonresident employee is less than $1000 withholding is not required.

Customer:

Hi lev, thanks again for your help. Do you know if New York has a similar exemption?

Lev :

It seems that NY doesn't have similar provision - see page 27 here - New York State nonresident employees - http://www.tax.ny.gov/pdf/publications/withholding/nys50.pdf
See also - http://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf

Customer:

great thanks again for your help!!

Lev and 2 other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Hi Lev,


Trying to wrap up this tax issue we have been having. I was just wondering if you would be able to tell me as the employer if we withhold only in the state where the employee is working (not necessarily the state where they are living), what penalty or risk would we assume by not withholding in the resident state? Thanks so much with all your help I think I am finally getting somewhere with my directors regarding this issue!

As an employee - you may withhold income tax based on residency of your employees. That is based on requests of employees. Generally - you are not obligated to do so.
But you are generally required to withhold income taxes based on the place of employment.
When you issue W2 form - you will income as taxable for the state where the work place is located, but if there is no withholding - that would be zero.
As a practical matter if the employee will file that state tax return and pay the tax liability calculated on that return - penalties are unlikely.
However - if the employee would fail to do so - the employer might be held liable for failure to withhold.
For instance for NJ - see page 12 - http://www.state.nj.us/treasury/taxation/pdf/current/njwt.pdf
Failure to file a report by the due date and/or failure to remit any taxes due by the due date will result in penalty and interest charges. Anyone required to withhold gross income tax does so as a trustee on behalf of the State of New Jersey. Thus business owners, partners, corporate officers, and some employees of such businesses may be held personally liable for failure to collect the tax when required or for failure to file returns and remit any taxes due on a timely basis.
Late Filing Penalties - 5% per month (or fraction thereof) of the balance of tax liability due at original return due date not to exceed 25% of such tax liability. A penalty of $100 per month (or fraction thereof) for each month return is delinquent may also be imposed.
Late Payment Penalty - 5% of the balance of the taxes due and paid late.
Interest - The annual interest rate is 3% above the average predominant prime rate. Interest is imposed each month (or fraction thereof) on the unpaid balance of the tax from the original due date to the date of payment. At the end of each calendar year any tax, penalties, and interest remaining due will become part of the balance on which interest is charged.
Customer: replied 3 years ago.

So if we do not withhold in their resident state for example California, for work being performed in NJ, we would be ok not withholding anything further in California (even if we have other employees who work/live in California)?


 


Also if they work in a state with no income tax like Florida but live in a state with income tax, like California, would we have to withhold in California or is that purely on the employee to pay their resident state taxes?

As we know - each state has different tax law and different withholding rules.
Specifically for California - see this publication - http://www.edd.ca.gov/pdf_pub_ctr/de44.pdf
page 15 - A California resident performs services that are subject to personal income tax withholding laws of both California and another state, political subdivision, or the District of Columbia.

Make the withholding required by the other jurisdiction, and:
• For California, withhold the amount by which the California withholding amount exceeds the withholding amount for the other jurisdiction, or
• Do not withhold any California PIT if the withholding amount for the other

So - as a California employer - you are required to withhold CA income tax for Florida wages.
jurisdiction is equal to, or greater than, the withholding amount for California.
The wages reported as PIT wages on the Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C) are the same wages that are entered in “Box 16” on your employee’s Form W 2. The PIT withheld must also be reported on the DE 9C.
Customer: replied 3 years ago.

Thanks this is the verification I wanted. If we fail to withhold in California the difference of what was withheld in the work state and California, would we be penalized the same as any employer who failed to withhold from an employee (whether they were employed in California or a resident who worked outside of California)

Yes - possible penalties are the same.
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