State Taxes and Independent Contractor Work

[Anonymous]

I recently moved out of the state I was working in as an independent contractor. From NJ to CT. I used to pay estimated tax payments to NJ and Federal. Now do I have to pay estimated taxes and income taxes in general to both NJ and CT since I live in CT but work as an independent contractor for a company in NJ? 

[TomD8 · Accepted solution]

Once you become a CT resident, all your income becomes taxable by CT, and NJ can only tax income you earn from work actually performed within NJ.

So if you move to CT and never physically work in NJ after the move, then you would only need to withhold CT taxes.

But if you move to CT and physically work in NJ after the move, then - depending on how significant your earnings are from NJ - you may need to withhold only NJ taxes.  That's because your earnings from work carried out in NJ will be taxed by NJ, but you'll be able to claim a credit on your CT tax return for the tax you pay to NJ on the income taxed by both states.

[Anonymous]

@TomD8 thank you! So if I'm understanding this correctly, if I'm working remotely, physically in CT, but for a company in NJ, then I don't need to withhold NJ taxes and only need to withhold CT taxes?

[TomD8]

@Anonymous --

Correct.  NJ taxes non-residents only on NJ-source income.  Work income is "sourced" where the work is actually (physically) performed.

[Rick19744]

Your facts don't indicate when you moved.

Keep in mind, that for the year of the move, you most likely will have two part-year resident tax returns due; one for NJ and one for CT.  

[Anonymous]

Thank you! I appreciate the advice!

[Anonymous]

@Rick19744 I did move in the middle of the year, so I appreciate that advice as well! I figured there would be some transition time where I would end up paying both for parts of the year. Again thank you so much for the advice! I appreciate it!

[Rick19744]

You are welcome.