New Jersey state tax withholding while working oversea

[oversea]

I lived in an apartment in New Jersey for the first 6 months in 2022 while working for my employer located in New Jersey. I am on work visa (H1B) and in process of green card application.

Due to the delay of application date and delay in processing time, I had to stay out of USA for 1 year. As a result, I am working remotely for my employer from outside USA since July 2022 while continuing to receive pay in USA, and expecting to return to New Jersey in July 2023.

I stored my belongings in a storage warehouse, and used my friend's address for USPS mail forwarding. I currently do not rent apartment and do not own housing in USA.

I requested my employer to change my address on W2 to my foreign address, but they refused to do so, so my address on W2 is still my previous apartment address in New Jersey which I already surrendered. This caused my employer to continue withholding NJ taxes (state tax, SUI, FLI) from my paycheck.

Looking at page 8 from below, it seems I should not be taxable in NJ from July 2022 onward, since I do not work or live in NJ.

https://www.state.nj.us/treasury/taxation/pdf/current/njwt.pdf

"If a nonresident employee works inside and outside New Jersey, only the compensation paid for work performed in New Jersey is subject to New Jersey withholding."

Is my understanding correct, and if so, is there any way to stop my employer from withholding NJ taxes?

Thank you.

[tagteam]

@pk

[pk]

@oversea , whereas you are correct in not  be  made to pay NJ taxes on earnings that are earned  abroad,  the fact that your current employer  refuses to comply does not leave you much of a choice -- it may be price  to pay for their (?) sponsoring  your Green Card application.  You are  between a rock and a hard place and as Brits would say "suck it up ".   I am not being factitious, because your choices  are limited ( assuming that your employer is sponsoring your GC application).

 Is there more I can do for you ?

[oversea]

@pk Thank you for your reply.

Without changing withholding or address, is it possible to use foreign address on tax return form and claim to be non-resident, so I am not subject to NJ taxes, to request all of the withheld taxes back through tax return? 

[rjs]

You certainly can and should use your foreign address on your tax return. The IRS and the state will send any correspondence, and mailed refunds, to the address on the tax return. So you should use an address where you will get anything that they mail to you.

You can file a New Jersey nonresident tax return showing no New Jersey income and a full refund of the New Jersey tax that was withheld. The problem you will have is that your W-2 shows New Jersey income in box 16. Because of that, the state will assume that you did have New Jersey income, but did not report it correctly. You will get a notice from the state saying that your tax return is wrong. Then you will have to try to convince them that the W-2 is wrong and that you did not work in New Jersey at all. If you can get a letter from your employer saying that you did not work in New Jersey, that would probably help. But it's a messy situation that will take time and effort to resolve, and there is no assurance of a satisfactory outcome.

(Ideally the letter from the employer would say that the New Jersey income and withholding on the W-2 are a mistake, but it doesn't sound like your employer would be willing to admit that.)

[TomD8]

Since the reality is that your income is legally not subject to NJ income tax, I would absolutely file a non-resident NJ return on which you show the NJ withholding but allocate zero income to NJ.

If NJ questions your return, you can explain the situation just like you did here.  If NJ requests corroboration from your employer and your employer refuses, get their refusal in writing and show it to NJ.

An alternative would be to print and mail your NJ return, along with a written explanation of the discrepancy between your tax return and your W-2.

The facts are on your side.

[oversea]

Thank you, all.

I will try to contact IRS and ask if they can provide something in writing to present to my employer to stop NJ withholding.

[rjs]

---

@oversea wrote:

I will try to contact IRS and ask if they can provide something in writing to present to my employer to stop NJ withholding.

---

@oversea  The IRS has nothing to do with state taxes or state withholding. They only deal with federal taxes. You could try the New Jersey Division of Taxation.