Just received underpayment penalty notice from New Jersey, how to double check penalty and also avoid this next year?

[NJ_Devils]

Received a notice from the state indicating installment interest due because of underpayment (my firm didn't withhold my NJ taxes because I work in Manhattan). I wasn't sure how to check if this amount is accurate and also how to avoid this underpayment penalty next year (same situation applies as last year)?

[Mike9241]

if NJ didn't send you a calculation you can use this form

https://www.nj.gov/treasury/taxation/pdf/current/2210.pdf 

to avoid the same thing for 2024, ask your employer if it will withhold NJ taxes. They are not required to do so in most case. if they do, you'll need to have extra withheld to make up for the first part of the year when nothing was withheld. the target is 100% of your 2023 NJ taxes (it should be line 50 of NJ form 1040.  if they won't all you can do is make estimated tax payments to get to the 100%. however, estimated tax payments only count when made so you will be subject to penalties for the early part of 2024.

see this link for making estimated tax payments

https://www.nj.gov/treasury/taxation//njit20.shtml 

in fact the required payment is the smaller of 4a or 4b from the 2210 for 2024. however knowing what your 2024 taxes will be is sometimes not possible. 

[Hal_Al]

If the balance of tax due with your return is more than $400, and you did not pay your required estimated payments (or withholding), you may be charged interest on the underpayment. This is true even if you pay all the tax due by the return due date.

https://www.nj.gov/treasury/taxation/njit21.shtml

[TomD8]

Did you remember to take a credit on your NJ return for the taxes you paid to NY?

https://www.nj.gov/treasury/taxation/njit14.shtml

[NJ_Devils]

@Mike9241 

I asked my employer and they asked me to fill out a NJ-W4 form. However, I was concerned that if I fill out this form, will I basically be paying double state taxes while waiting for a refund next year?

I only owed $600 to NJ state for 2023, but I wasn't sure if I can "manually" set the taxes withheld for NJ to match my actual tax liability vs just having another $800 deducted from my paycheck semiweekly. Any advice for my case?

[Mike9241]

if i understand correctly you should be taxed in NY and NJ. NY because you work there. NJ because you live there. There is no reciprocity between these states. You avoid some of the double taxation because NJ should allow a credit (Form NJ-COJ) for some or all of the income taxes paid in NY.

as to your question ask your employer

[TomD8]

"...vs just having another $800 deducted from my paycheck semiweekly"

Why does it have to be $800?  You can enter any additional amount you want withheld on Line 5 of your NJ-W4.

https://www.nj.gov/treasury/taxation/pdf/current/njw4.pdf

[NJ_Devils]

My NJ 2023 taxes were just $600, after credits to NY, and had to pay penalty for underpayment. Now, I want to avoid that this year but was worried if I fill out NJ withholding form, I will basically get the FULL State taxes taken for both NY and NJ each paycheck (aka extra $800) and then have to wait for a big refund later because of credits to NY.

I wanted a way where I can directly control the exact amount withheld for NJ taxes from my paycheck.