I live in NJ and my employer in TX, file NJ W4 Withholding ?

[minawz]

I live in NJ and my employer in TX, should I file NJ W4 Withholding money?

Will NJ tax me on my income from TX?

[Hal_Al · Accepted solution]

Q. I live in NJ and my employer in TX, should I file NJ W4 Withholding money?

A.  Yes

Q. Will NJ tax me on my income from TX?

A. Yes

The general rule is: your report all your income on your home state return, even the income earned out of state. You file a non-resident state return for the state you worked in and pay tax to that state. Your home state will give you a credit, or partial credit, for what you paid the non-resident state. 

Since TX does not have an income tax, you do not have a non-resident return to file. But you still have to pay tax on that income to your home state.

When you worked in a state without an income tax (e.g. Texas or Florida), there will be no credit, since there was no TX tax. In other words, having worked in a state without an income tax  (or your employer just having their headquarters there) does not get you out of paying state tax on that income, to your home state.

[minawz]

Thank you so much for answering my question!

[rjs]

Are you working in New Jersey or in Texas? Your income is from the state that you work in, even if the employer is located in a different state. If you work in New Jersey, all the money you earn is New Jersey income, and is taxed by New Jersey. It doesn't matter what state your employer is in. If you work in New Jersey, you will be taxed the same as if you worked at a company that was located in New Jersey. If you work in New Jersey for a Texas company, your income is New Jersey income, not Texas income. You are not earning income in Texas.

If you are an employee (you get a W-2), not an independent contractor, your Texas employer might not withhold New Jersey tax. They are supposed to, but they might not. If they don't, you will have to make estimated tax payments to New Jersey to make up for not having any state tax withheld. Otherwise you will end up with a huge tax bill at the end of the year, plus penalties.

If you are an independent contractor (self-employed), the company will not withhold any tax, either federal or state. In that case you definitely have to make estimated tax payments for both federal and New Jersey.