Remote worker in NJ (CT employer)

[Allthethings]

Hi folks,

My current employer called the other day to inform me that as of the new year, they'll be coverting me from a NY employee to a CT employee though for now I will remain working remote from my home in NJ.

What sort of tax implications should I brace myself for in 2023 (filing in 2024)? Should I have my spouse who works for a NJ company increase their withholding? Can I claim exempt from CT taxes while I work entirely in NJ since there seems to be no Convenience of the Employer rule unlike NY? (Not sure if they'll turn me into hybrid at some point in the new year.) Will NY find it odd that I won't file NY taxes when 2024 rolls around assuming I stay with this employer all year since I've filed NY before for this same employer? (Note that HR is in California, so that's the address on past W2s.)

Just trying to get this properly sorted before my next pay period starts since that's the first one that will be in the new year.

[tagteam]

@Critter-3 

[TomD8]

CT applies the "convenience of the employer" rule only to non-residents who reside in states that themselves have that rule.

Since NJ does not have the "convenience" rule, income you earn by working remotely from an NJ location is not subject to CT income tax.  (But if you were to perform any work from a location inside CT, the income from that work would be taxable by CT.)

If you as a non-resident of NY work for a CT employer, and never physically work from a location inside NY for the entire tax year, then your work income is not taxable by NY.

ALL your income is of course taxable by your home state of NJ, regardless of where earned.

[rjs]

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@Allthethings wrote:

Can I claim exempt from CT taxes while I work entirely in NJ

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You don't have to "claim" anything about CT tax, since you are not working in CT. Just make sure that your employer does not withhold CT tax and does not report any CT wages on your 2023 W-2.

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@Allthethings wrote:

Not sure if they'll turn me into hybrid at some point in the new year.

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If you later start working part of the time, or full-time, in CT, then, of course, they will have to report the income you earn in CT as CT wages and they will have to withhold CT tax on that income. Then you will have to file a CT nonresident tax return as well as your NJ resident tax return.

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@Allthethings wrote:

Should I have my spouse who works for a NJ company increase their withholding?

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Your employer should withhold NJ tax from your pay, since you are working in NJ. If they won't do that, increasing your spouse's NJ withholding is one possible solution, as long as you file jointly. The other possible solution is to make quarterly NJ estimated tax payments. One way or another you want to make sure that you pay enough NJ tax during the year so that you don't end up with a huge tax bill, plus penalties and interest, when you file your 2023 NJ tax return.

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@Allthethings wrote:

Will NY find it odd that I won't file NY taxes when 2024 rolls around assuming I stay with this employer all year since I've filed NY before for this same employer? (Note that HR is in California, so that's the address on past W2s.)

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No, they won't find it odd as long as there are no NY wages, and no NY tax withheld, on your 2023 W-2. The employer's address on the W-2 doesn't matter.

[Allthethings]

Employer currently has offices in CT, NY, and CA. I have done all my work from NJ save for one day when I worked from a friend's apartment in NY. The employer has been withholding NY taxes since I started working for them in 2020, mid-pandemic. They never once made my NJ location a bona fide office location, so I have been paying NY taxes (not the city taxes tho) throughout my employment with the company as it was my understanding they were considering me a NY-based employee and NY has the convenience of the employer rule. Tho the majority of the computers I remote into are in CT (if I remote into a computer in NY or CA, it is typically to start a file transfer to those locations and then I hop off).

[TomD8]

If you were assigned to and could have worked from your employer's NY office in 2022, but instead chose to work remotely from your NJ home, then you're correct that the "convenience" rule would apply, and your earnings would be subject to both NY and NJ taxation.

Once you are assigned to your employer's CT office, you would be subject to CT income tax only on earnings from days that you physically worked from within CT.  As @rjs said earlier, if in 2023 you will never physically work within CT, then for 2023 your employer should withhold NJ taxes only.  If your employer will not withhold NJ taxes, then you must make quarterly estimated tax payments to NJ.

[Allthethings]

Alright, so an update now that I've gotten my first paycheck of 2023.

I filled out the CT w4 on 1/1, telling them I'm exempt from CT tax. I also filled out the NJ w4 the same day, telling them my wages are subject to NJ tax.

Now here's my confusion:

• There is withholding for CT Paid Family Leave Insurance
• There is no withholding for NJ UI
• There is no withholding for NJ FLI
• There is no withholding for NJ SWF

It is accurate for the income tax withholding as I do not have CT income tax withheld, but I do have NJ tax withheld. Other than federal income tax, social security tax, and medicare tax, the only other things affecting my take home are my 401k and other benefits I elected to take.

Does anyone have any thoughts on whether these other withholdings (or lack thereof) is accurate for my scenario? My spouse works for a NJ employer, so I see the above NJ taxes on their paystubs, which is how I know about them.

[rjs]

I don't think it's accurate. It looks like they changed the income tax withholding but not the other state payroll taxes.

There should, of course, not be any CT withholding of any kind. Not CT PFLI or anything else for CT. You are not a CT employee.

They should be withholding NJ UI, SWF, and FLI. UI and SWF are usually combined into one deduction, and it's usually just called SUI or NJSUI. But it's okay if they split it up. I'm pretty sure they should also be withholding for NJ state disability insurance (NJSDI), unless the employer has private disability insurance and is paying the full cost.

Your employer's payroll department may not be familiar with NJ payroll tax requirements. From what you've said before, you might be their first and only NJ employee. They should consult with an expert at their payroll service, if they are using a service, or with some other expert who can advise them on NJ payroll tax requirements.

You should try to get them to reverse the CT PFLI withholding, refund it to you, and make sure it does not show up on your W-2 at the end of the year. I suspect you would have a lot of difficulty getting it refunded by the state at the end of the year. It's a mistaken deduction.

[TomD8]

"You should try to get them to reverse the CT PFLI withholding, refund it to you, and make sure it does not show up on your W-2 at the end of the year."

True, unless you are eligible for CT PFLI coverage even though you are a non-resident remote worker.  I would check with your HR department about that.  

[Allthethings]

Well, I wrote HR and explained how I think I am exempt from CT taxes and my wages are instead subject to NJ tax. They replied that I am NOT exempt from CT. They will not be correcting the CT PFL deduction or adding in deductions for NJ FLI/SUI/DI taxes.

I don't know what to do. I don't want to fill out a CT W4, telling them to withhold CT tax and wait until next year to allocate 0% of my wages to CT (maybe a small percentage if I work from my mom's house in NY occasionally though I am also unsure if that earning is subject to CT tax), and in the meanwhile have my spouse bump up their withholding to cover what we'll eventually need to pay NJ (so we can avoid the estimated tax payments). These lower our take home at the end of the day though theoretically, we'd be getting the money back eventually.

Any further advice?

[TomD8]

I suggest you refer your employer to page 8 of the Connecticut Employers Tax Guide, where they will find the following statement:

"Generally, wages of a nonresident are not subject to Connecticut income tax withholding if the wages are paid for services performed entirely outside of Connecticut."
https://portal.ct.gov/-/media/DRS/Publications/pubsip/2021/IP-2021-1.pdf

[Allthethings]

Thank you. They sent over to all employees today a blank paper copy of the CT W4 as I suspect they got many inquiries from folks over the long weekend. I filled that out with option D, but also sent over CT W4NA, putting the CT percentage at 0%, and they say it'll be updated for the next paycheck.

Now whether that reduces the CT PFL in addition to keeping CT income tax withholding at 0, it remains to be seen until next pay day 1/27. It certainly doesn't do anything for NJ though.

[jay6]

I would think that non resident working in CT would not be required to pay CT PFLI tax.  But is there any official publication that confirm this?  I guess we need to show the payroll department to ask them to not withhold the tax. Thanks.

[Cynthiad66]

I have not found anything contrary to what CT is saying about Withholding.  My question is if you are entitled to the benefits of PFL?  If you enjoy the benefits then you have to pay the price.  This is not just an arbitrary issue, sounds like this will have to be legislated at the State level.  @jay6