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CuriousWhale
Level 3

Low Withholding for W2 for Higher Earner

I am a NJ resident who works in Philly.

 

The Philly local wage tax is withheld at 3.44% of my pay and is fixed . I am allowed to use that as a dollar for dollar credit on my NJ state tax return.

 

NJ law says that an employer doesn’t have to withhold state tax if they are withholding other localities at a rate equal or greater than NJ.

 

Based on my current paychecks I will end up with state wages of $100k and Local Wothhokding of $3400.

 

I will also have a few hundred dollars withheld from NJ to make up the necessary difference in tax.

 

my question is can a w2 be issued with a low state withholding to income rate?

 

i.e state wages of $100k, withholding of $250

4 Replies
Critter-3
Level 15

Low Withholding for W2 for Higher Earner

The W-2 simply reflects the facts of what you earned and the fed/state withholdings that happened so it can be anything ... your issue is the employer ... are they withholding correctly ?  Talk to them to sort this out. 

CuriousWhale
Level 3

Low Withholding for W2 for Higher Earner

The withholding is correct due to the law allowing full credit if the local employer wage taxes paid, 

 

the question is a question of if the agency systems will “ accept” a W2 with such a low wage to income withholding 

Hal_Al
Level 15

Low Withholding for W2 for Higher Earner

Q. The question is a question of if the agency systems will “ accept” a W2 with such a low wage to income withholding?

A.  Yes.

 

Tax credits (in your case, for the Philly income tax) are treated the same as withholding for purposes of determining whether an underpayment penalty is due. 

CuriousWhale
Level 3

Low Withholding for W2 for Higher Earner

Thank you. I wasn’t sure if agency technology needed to hold a certain ratio of wages to w/h for it to accept and process it but it seems like I was overthinking that. 

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