100% of my income in 2020 is generated and taxed outside US. No federal tax due. How do I report it for NJ state? SHould not have NJ state tax either.

Why is your income not taxable in the US? 

Are you a New Jersey resident? New Jersey residents are taxed on income earned anywhere. Non-residents are taxed on “New Jersey source income”.

 

If you are not a NJ resident – and had no income connected to NJ – then you would not have to file a NJ income tax return and do not have to report your overseas income to NJ. If you are a resident, file a NJ-1040.

 

Resident

New Jersey says: “A New Jersey resident must report all taxable income received, whether from New Jersey sources or not, on the State return.” See New Jersey Resident Return Examples

 

Nonresident

For nonresidents, New Jersey income tax liability is based on the percentage of your total NJ income.

 

You can be a New Jersey resident even if you did not spend one day in New Jersey if NJ is your permanent home (domicile). For example, you may remain a New Jersey resident while temporarily working out of state, attending university or serving in the military.

 

You are considered a resident for New Jersey tax purposes unless:

1. You did not maintain a permanent home in New Jersey;
2. You maintained a permanent home outside New Jersey; and
3. You did not spend more than 30 days in New Jersey.

Part-Year Residents and Nonresidents Understanding Income Tax

Yes NJ resident. Got it, thanks.

Foreign source income taxed abroad. Double taxation treaty.

Does the treaty apply to state tax, or only federal tax? Check with a New Jersey tax lawyer.

 

If you live in New Jersey, how is your income "generated" outside the U.S.? If you are being paid for work that you do in New Jersey, that is U.S. income (and New Jersey source income), not foreign income, even if you do the work for a foreign company and you are paid by a foreign employer.

 

@ch-bhattacharya you said, "Should not have NJ state tax either," which I interpret to mean you are not filing a federal income tax return.

 

Depending on your situation, you may still have to file a Form 1040 even if all your income is exempt by treaty. In such cases you include your treaty-exempt income and then subtract it.

 

TurboTax Expert alumni @Leonard explains the process in How to claim a tax treaty with Turbotax?

 

You may want to speak with a TurboTax Expert. Ask for a CPA, Enrolled Agent or Tax Attorney.

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@ch-bhattacharya wrote:

Foreign source income taxed abroad. Double taxation treaty.

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Generally speaking, if you are a US citizen or resident alien with a green card, you are required to file a US tax return reporting all your world-wide income and paying tax on it.  If you also pay foreign tax on the same income, you get a credit on your US return, but you still have to file the US return.

 

Likewise, generally speaking, if you are a resident of New Jersey, you are required to file a NJ tax return and pay NJ income tax on all your world-wide income.  That's to pay for all the benefits you get from living in New Jersey (roads, schools, infrastructure, etc.)

 

If you have a tax treaty, you will generally still file a federal return and you claim the treaty exemption on your return.  New Jersey does NOT honor tax treaties and you will still have to file a New Jersey tax return and pay New Jersey income tax.

 

I did find a lawyer blog who claims that the tax treaty is supposed to apply even in states that claim it doesn't apply. Of course, the lawyer wants clients.  If you are going to refuse to pay NJ taxes, I suggest you obtain professional legal and tax advice. 

 

https://www.irs.gov/individuals/international-taxpayers/tax-treaties

https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z