This seems odd all the way around.
If I understand you, your NJ taxable income is $169 higher than it should be, yet you owe an additional $98? That would imply a marginal tax rate of more than 50%, so I question if I understood you correctly.
I think it would be productive to contact your payroll people to ask why the discrepancy between your federal income and your state incomes. This might go a long way to answering your final question.
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