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New Employer is in NJ and they are withholding NJ taxes thought I live in NC and questions about "Non-Resident"

I've seen a few versions of this question but some definitions are ambiguous. In short, I just started working for company that is based in NJ, but I live and work from my home in NC. When I looked at my first check, they had a deduction line item for NC but withheld $0, but for several line items, they withheld NJ taxes. 

 

I asked their accountant who claimed the 2 states have an agreement between each other to "transfer" the taxes to one another. This is strange to me because I worked for another employer (significantly larger though) that was based in NJ and I never saw anything like this while living in NC or TX. 

 

Some of the definitions when I read up on this are ambiguous like if I earned money "in" NJ . Well the company is "in" NJ, but I was never "in" NJ when I was working, living  or earning said funds. I see the mention of Non-Resident returns, but those usually seem to apply to neighboring states like between NY and NJ, or PA and NJ.  Does the idea of a "NJ Non-Resident Return" (in terms of state taxation) apply to anyone who works for a company solely based in NJ but lives in another state?

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1 Best answer

Accepted Solutions
BillM223
Expert Alumni

New Employer is in NJ and they are withholding NJ taxes thought I live in NC and questions about "Non-Resident"

Your accountant is referring to "reciprocal" states. But New Jersey and North Carolina do not have such an agreement. Look up "tax reciprocal states" and see what you find.

 

Note that the entries for state withholding on your W-2 is just a statement by your employer of what they did and which states they sent the money to. it does NOT mean that your employer did it right (or even knew what to do).

 

In most cases, you are taxed in the state where you live and in the states where you work.

 

For example, your employer may not be able (or willing) to do state withholding for North Carolina (it involves creating an account with the state and sending the money and reports there).

 

In TurboTax, you should enter your New Jersey data first as a non-resident return, then enter your North Carolina data as a resident return. In this case, states either allocate income to the two states, or they use the taxes paid in the non-resident state as a credit in the resident state. It will work out so that you are not double-taxed (much).

 

And do talk to HR or payroll and see is you can get them to do real withholding for North Carolina.

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1 Reply
BillM223
Expert Alumni

New Employer is in NJ and they are withholding NJ taxes thought I live in NC and questions about "Non-Resident"

Your accountant is referring to "reciprocal" states. But New Jersey and North Carolina do not have such an agreement. Look up "tax reciprocal states" and see what you find.

 

Note that the entries for state withholding on your W-2 is just a statement by your employer of what they did and which states they sent the money to. it does NOT mean that your employer did it right (or even knew what to do).

 

In most cases, you are taxed in the state where you live and in the states where you work.

 

For example, your employer may not be able (or willing) to do state withholding for North Carolina (it involves creating an account with the state and sending the money and reports there).

 

In TurboTax, you should enter your New Jersey data first as a non-resident return, then enter your North Carolina data as a resident return. In this case, states either allocate income to the two states, or they use the taxes paid in the non-resident state as a credit in the resident state. It will work out so that you are not double-taxed (much).

 

And do talk to HR or payroll and see is you can get them to do real withholding for North Carolina.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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