New Jersey Salary Paycheck Calculator
Figuring out New Jersey payroll taxes doesn’t have to be a dreaded event. Check out the key information below to get started.
New Jersey state payroll taxes
New Jersey withholding tax
New Jersey employers are required to withhold New Jersey income tax from workers’ paychecks. Even employees who aren’t New Jersey residents will need to have tax withheld. There is an exception for Pennsylvania residents, which we will discuss a bit later.
You can determine the amount of income tax that needs to be withheld by having your employees fill out Form NJ-W4, Employee’s Withholding Allowance Certificate. Here, your workers enter their filing status, their number of allowances, or whether they are exempt from withholding. This information will calculate the proper withholding for each employee.
If your employee writes “exempt” on Line 6 of the Form NJ-W4, this means you do not have to withhold income tax because they fall below the minimum filing requirements. An exemption is only good for one year. To continue to claim exemption, a new form must be completed each year.
With the NJ-W4 information and the New Jersey withholding tables or formulas, you can calculate the withholding. There is an easier option—payroll software. Calculating the withholding amount with payroll software is as simple as entering your worker’s tax information and wages. The computer does the rest.
With limited exceptions, all New Jersey employers must pay and file payroll taxes electronically. How often you’ll pay depends on how much tax you collect per month or per year. All employers will file quarterly summary reports using Form NJ-927, Employer’s Quarterly Reports. New Jersey has a helpful employer guide covering income tax withholding.
New Jersey unemployment tax
Employers will also need to pay unemployment insurance, or SUTA (state unemployment tax). New Jersey announces new rate tables each year, which can be found at the New Jersey Department of Labor and Workforce Development.
The New Jersey taxable wage base for 2022 for unemployment insurance is $39,800.
Federal payroll taxes in New Jersey
Here are four federal payroll taxes that you will want to know about.
Federal income tax (FIT)
FIT is paid by employees via payroll deductions. You can determine how much to withhold by obtaining a Form W-4, Employee’s Withholding Certificate, from each employee. This will outline the employee’s dependents, filing status, and other variables that will allow you to determine the proper withholding rate. Using the W-4, the employees’ pay amount, and the federal tax tables, you can calculate the amount of tax to take out.
Federal Insurance Contributions Act (FICA) is made up of the Medicare tax and the Social Security tax. In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. And the Medicare tax requires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.
Additional Medicare tax
Employees who earn more than $200,000 in wages will be subject to the Additional Medicare tax withholding of 0.9%.
Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but most employers only have to pay 0.6% each year.
Paying and filing federal payroll taxes
You’ll pay FIT, FICA, and the Additional Medicare tax either monthly or semi-weekly depending on the amount of tax you owe. And each quarter the Form 941, Employer’s Quarterly Federal Tax Return, is due from every employer.
FUTA tax is generally paid annually but quarterly payments may be necessary depending on how much tax you owe. And all employers need to file Form 940, Annual Federal Unemployment (FUTA) Tax Return.
Additional New Jersey payroll rules and laws
Below are some additional topics that are useful in New Jersey.
- New Hires: New hires and rehires must be reported to New Jersey Child Support Employer Services and can be done via their online portal. This must be done within 20 days of their hire date.
- Federal salary threshold: Because New Jersey does not have its own state salary threshold, it adheres to the federal salary threshold, which is now $684 per week (equivalent to $35,568 per year for a full-year worker). The Department of Labor permits employers to count some bonuses, commissions, and other incentive payments toward meeting the standard salary level (up to 10%). Employees who earn at least $107,432 per year may qualify as “highly compensated.” See this Department of Labor fact sheet for details.
- Family Leave Insurance: New Jersey allows for employers to withhold Family Leave Insurance through paycheck deductions. Employees are then eligible for paid leave of up to 12 weeks to bond with new children or to care for ill family members (including COVID-19).
- Final paychecks: Employers can pay final paychecks to individuals that quit, or were fired, by the next regularly scheduled pay date.
- Workers’ Compensation insurance: Requirements to obtain Workers’ Compensation vary by state, this table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit. Head to this article and click the workers’ comp audit reports dropdown for more information.
- Pennsylvania residents working in New Jersey: Based on reciprocity agreements, Pennsylvania residents are the only nonresident workers who are not required to have New Jersey income taxes withheld. These workers will need to complete Form NJ-165, Employee’s Certificate of Nonresidence in New Jersey.
- Temporary Disability Insurance: New Jersey employers are required to provide temporary disability insurance to employees and both contribute to the cost.
- Earned sick leave: Employers need to provide employees with up to 40 hours of earned paid sick leave per year.
There’s a lot to keep in mind and staying compliant is crucial to avoiding penalties and staying in the good graces of your employees. If you’d rather spend your time on growing your business and less time on administrative tasks, we get it. Today there are plenty of options. Comprehensive payroll providers can automate most of the payroll tasks. And a qualified accountant can help you with payroll and much more.