The New Jersey Division of Taxation has released an updated employer withholding guide containing revised percentage method withholding tables effective January 1, 2019. (Publication NJ-WT, New Jersey gross income tax withholding instructions, revised January 2019.)

The revised tables reflect a reduction of the withholding rate for individuals earning over $5 million to 11.8% beginning January 1, 2019, down from the 15.6% withholding rate used for wages paid on or after September 1, 2018. (New Jersey Division of Taxation website.)

The Division has not yet issued a revised Form NJ-W4, Employee'sWithholdingAllowanceCertificatefor calendar year 2019. However, employees may use the Form NJ-W4 on page 28 of Publication NJ-WT if they need to change their withholding allowances.

2018 legislation increased the income tax rate for high earners

As we previously reported, FY 2019 budget legislation (P.L. 2018, c.45) increased individual income taxes on high-wage earners by instituting a higher income tax rate on income over $5 million. Effective January 1, 2018, annual income of more than $5 million is taxed at 10.75%, regardless of the taxpayer's filing status. Revised income tax withholding tables were issued for wages paid on and after September 1, 2018, reflecting a withholding rate of 15.6%.

The increased withholding rate of 15.6% allowed taxpayers affected by the rate increase to "catch up" on their withholdings for 2018 since the new tax rate was retroactive to January 1, 2018. (EY PayrollNewsflashesVol. 19, #115, 7-9-2018; #129, 8-1-2018.)

No supplemental rate of withholding

There is no supplemental rate of withholding for New Jersey income tax.

If the supplemental wages are paid at the same time as regular wages, compute New Jersey income tax by adding together the employee's regular wages and supplemental wages and withhold at the appropriate rate based on the combined payment.

If the supplemental wages are paid at a different time, compute New Jersey income tax withholding by using the employee's NJ-W4, disregarding exemption allowances claimed.

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EY Payroll News Flash