If your small business has employees working in New Jersey, you’ll need to withhold and pay New Jersey income tax on their salaries. This is in addition to having to withhold federal income tax for those same employees. Here are the basic rules on New Jersey state income tax withholding for employees.
With rare exceptions, if your small business has employees working in the United States, you’ll need a federal employer identification number (EIN). You should obtain your EIN as soon as possible and, in any case, before hiring your first employee. EINs are nine-digit numbers issued by the IRS and you’ll need one first and foremost for federal taxes. Many states issue separate tax ID numbers for withholding tax purposes. New Jersey, however, generally uses the EIN with three zeroes added to the end. You can apply for an EIN at the IRS website. Generally, if you apply online, you will receive your EIN immediately.
Apart from your EIN, you also need to establish a New Jersey withholding tax account with the New Jersey Division of Revenue and Enterprise Services (DOR). You can register with the DOR either online or on paper. For New Jersey businesses (corporations, LLCs, registered partnerhips), you’ll need your New Jersey-issued business ID number to complete the registration process. To register online, go the DOR’s NJ Business Gateway Services website. To register on paper, complete Form NJ-REG, Business Registration Application. You can download a blank Form NJ-REG with instructions from the business forms section of the DOR website. You can submit Form NJ-REG by regular mail or in person. There is no fee to register your business with DOR.
Shortly after you register, the DOR will mail you a confirmation letter that includes your EIN as well as a Personal Identification Number (PIN) that you will need in order to file withholding returns online.
All new employees for your business must complete a federal Form W-4. In addition, an employee may complete a New Jersey Form NJ-W4, Employee’s Withholding Allowance Certificate, to declare different withholding information for state purposes. You can download blank Form NJ-W4s from the employer withholding forms section of the DOR website. You should keep the completed forms on file at your business and update them as necessary.
In New Jersey, there are three primary payment schedules for withholding taxes: weekly, monthly, or quarterly. (An annual payment schedule, not covered here, is available for employers whose only employees are household workers.) Your payment schedule will depend on the average amount you hold from employee wages over time. Monthly and quarterly schedules are combined in the sense that monthly payments are not necessary for months where withholding tax liability is below a certain threshold; only quarterly payments are due during those periods. In general, the more you withhold, the more frequently you’ll need to make withholding tax payments.
The exact threshold dollar amounts for the different payment schedules, as well as other rules, may change over time so you should check with the DOR at least once a year for the latest information.
Due dates for payments:
If the payment is due on a Saturday, Sunday, or legal holiday, the due date is adjusted to the next business day.
Payments must be made online. This often means using an electronic funds transfer (EFT). You can make payments through the DOR’s On-Line Filing Service, which is accessible through the withholding information section of the DOR website. (Technically, monthly payments for the eight months that that don’t come at the end of calendar quarters use Form NJ-500, Monthly Remittance of Gross Income Tax, and monthly payments for months that come at the end of calendar quarters, as well as quarterly payments, use Form NJ-927, Employer’s Quarterly Report, but these forms are not actually available on paper.) For a complete explanation of online filing and payment options, check the DOR’s Guide to Electronic Filing and Payment Services.
The DOR provides several different methods for calculating how much tax to withhold. For more information, check the current version of DOR Publication NJ-WT, New Jersey Gross Income Tax, which you can download from the employer withholding forms section of the DOR website.
Apart from making scheduled tax payments, all businesses must file quarterly withholding tax returns. The returns reconcile the tax paid for the quarter with the tax withheld for the quarter. Weekly payers use Form 927-W and monthly and quarterly payers use Form 927 (both forms are titled Employer’s Quarterly Report). Quarterly reports are required even if no tax is withheld. New Jersey requires all employers to file electronically.
Quarterly returns are due on or before the last day of the month following the close of the quarter:
As with tax payments, any return due date that falls on a Saturday, Sunday, or legal holiday, the due date is adjusted to the next business day.
After the end of the year, you must file an annual reconciliation with the DOR that summarizes the employee taxes you’ve withheld during the year. The annual reconciliation is in addition to providing each of your employees with a federal form W-2 summarizing the employee’s withholding for the year. Use Form NJ-W-3, Reconciliation of Tax Withheld. You should attach copies of the federal W-2s sent to all of your employees working in New Jersey. An annual reconciliation must be filed even if no taxes were withheld. The annual reconciliation may be filed by mail or electronically. Similarly, W-2s may be submitted by mail or filed electronically. You can download Form NJ-W-3 from the employer withholding forms section of the DOR website. The annual reconciliation is due on or before the last day of February for the preceding calendar year.
This article is only concerned with employees, not independent contractors. In general, different tax rules apply to independent contractors.
You may decide that it’s easiest to hand over responsibility for payroll, including withholding taxes, to an outside payroll service. If so, keep in mind that your business, or even you personally, may still be held directly responsible for mistakes made by an outside payroll company.
This article touches on the basic elements of New Jersey employee withholding taxes. Under New Jersey law, any officer or employee of a corporation who has the duty to collect and pay withholding taxes is a “responsible person” and can be held personally liable for taxes that are not paid. Avoid possible penalties for making mistakes by checking both the IRS and DOR websites for the latest information. You also can get more information about small business tax issues in other articles here on Nolo.com.