Effective retroactive to January 1, 2020, the New Jersey tax rate on income between $1 million and $5 million has increased to 10.75% from 8.97%. Employers must withhold income tax at the rate of 21.3% from salaries, wages, and other income between $1 million and $5 million during the taxable year. The higher withholding rate will allow affected employees to “catch up” on withholdings for the year [New Jersey Division of Taxation, News, 10-2-20].
Employers do not have to correct prior withholdings but must use the new rate immediately and going forward. Updated percentage method withholding tables are available. The New Jersey Division of Taxation will not impose interest or penalties for insufficient withholdings that may be due before September 29, 2020, if the underpayment is a result of the new rate.
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Lia Coniglio, Esq., is Managing Editor of PayState Update and Manager of State Payroll Information Resources for the APA.
