Payroll tax in New Jersey: What employers need to know [2024]

One of the most painful chores every employer has to deal with is tax payments. While many small businesses want to cross taxes off their list quickly, such an approach could be risky, resulting in mistakes or—worse yet—financial penalties. 

For companies operating in New Jersey, understanding the complex tax landscape is more than a fiscal responsibility; it’s a legal obligation. The state of New Jersey follows a progressive tax scheme with up to eight income classes. On top of federal and state laws, there are also local payroll obligations some NJ employees must fulfill.

If you operate or have staff members living in New Jersey, you must be aware of the different payroll taxes you need to settle, along with their rates and payment deadlines. Let’s dive in.

New Jersey payroll taxes

New Jersey companies have both state and federal tax obligations.

The Division of Taxation is responsible for handling New Jersey taxes at the state level. There are four types of payroll taxes New Jersey. We discuss each in detail below.

State income tax 

On top of federal income taxes (paid to the IRS), companies that employ workers in New Jersey must also withhold state income tax from their employees' salaries. This also applies to workers who are nonresidents; however, employees who are subject to income tax in another jurisdiction and whose income tax rate is the same as or higher than New Jersey's rate might be exempt from this obligation. 

New Jersey has a progressive tax system, which features seven or eight income classes, depending on the taxpayer’s filing status. The income tax rate depends on the employee’s income level and varies between 1.4% (which includes those making minimum wage) and 10.75%.

The 10.75% tax brackets apply to all individuals with a gross income exceeding $1 million, regardless of whether they are single or married.

Income taxes include contributions of 0.1% to the Workforce Development Fund and 0.0175% to the Supplemental Workforce Fund.

It’s worth knowing that Pennsylvania residents working in the state don’t need to pay New Jersey income tax—under a reciprocal personal income tax agreement between the two states, they only pay tax in their home state. Similarly, New Jersey residents don’t need to pay taxes in Pennsylvania, even if they perform work in the state.

For more New Jersey income tax withholding instructions, consult this website.

Temporary Disability Insurance (TDI) Tax

New Jersey’s Temporary Disability Insurance (TDI) is a cash benefit for employees who are found unable to work due to a health condition (physical and/or mental) or another circumstance disabling them from rejoining the workforce. It also includes time off during pregnancy and postpartum recovery.

In the state of New Jersey, both employers and employees must contribute to the TDI program, unless otherwise specified by the Division of Temporary Disability and Family Leave Insurance for the given tax year. 

The taxable wage cap is revisited annually and is set based on the average weekly salary in the state. It’s the employer’s responsibility to settle not only their part of the TDI tax but also withhold the relevant rate from each worker’s salary.

For the 2024 calendar year, The NJ Department of Labor (NJDOL) kept employee contributions at 0%. The TDI tax rate for New Jersey employers varies on the experience rate and can stand anywhere between 0.10% and 0.75%.

The federal government is exempt from TDI tax for its employees, while it’s optional for local authorities, including municipalities and counties. Governments that choose to participate in the program contribute at a rate of 0.9% for 2024. 

An alternative to state TDI programs is private insurance plans. Employers who aren’t covered by federal programs may choose to offer it as part of a wider workers’ comp plan. These plans aren’t taxable. However, as they qualify as ‘ordinary’ and ‘necessary’ business expenses and are required by law, they are eligible for a tax deduction for employers.

Unemployment insurance tax

All companies that have at least one worker who gets paid over $1,000 per year are subject to State Unemployment Insurance (SUI) tax under SUTA, i.e., New Jersey’s State Unemployment Tax Act. In 2024, SUI levies are calculated using a taxable wage base of $42,300. Rates range from 1.2% to 7.0% and depend on the employer’s experience rating. 

The unemployment insurance tax rates are calculated on an annual basis according to the fiscal year, running from July 1 to June 30. For new employers, the SUI rate stays the same for three calendar years, after which it is adjusted annually based on their experience. 

Only companies that employ agricultural or domestic workers as well as some non-profit organizations are exempt from paying New Jersey’s state unemployment taxes. It’s worth noting that employers who pay SUI taxes might be subject to a discount of up to 5.4% on federal unemployment insurance taxes, obligatory under the Federal Unemployment Tax Act (FUTA).

Local payroll taxes

In addition to the state taxes mentioned earlier, some cities within New Jersey also enforce their own tax regulations and wage laws. Cities with local payroll taxes include:

• Newark: 1% payroll tax paid by employers. Certain exemptions apply.
• Jersey City: 1% payroll tax paid by employers. Certain exemptions apply.

Wrapping your head around payroll taxes can be overwhelming, especially with a tax system as complex as in New Jersey. Luckily, Rippling’s payroll compliance software can take this burden off your shoulders. Rippling calculates all your taxes and pays them automatically on your behalf. It also submits correct tax forms to the right authorities making sure you stay compliant with the federal and New Jersey state and local laws. And if you need help with registering and maintaining your state tax accounts, Rippling’s PEO can do these for you.

Payroll tax due dates in New Jersey

In New Jersey, income tax must be withheld from workers’ salaries and employer payments and remitted electronically to the State. Depending on a few factors, income tax will need to be paid weekly, monthly, quarterly, or annually. These conditions include whether you employ a domestic worker, as well as how much income tax you need to withhold each year.

• Weekly payments: New Jersey employers who owe $10,000 or more annually in income tax withholdings are weekly payers. Taxes must be paid on or before the Wednesday of the week following the week in which the payday(s) occurred. 
• Monthly/quarterly payments: Employers who aren’t weekly income taxpayers are subject to either monthly or quarterly payments. If the tax obligation exceeds $500, you need to pay on or before the 15th day of the month after the end of the reporting period. Taxes for the third month of each quarter are remitted on a quarterly basis. That said, if the tax obligation for the first and/or second month of the quarter was under $500, these might also be settled on a quarterly basis.
• Annual payments: These apply to domestic employers who secure federal taxes for employees working from their household. The tax payment deadline for the past year is January 31. 

The remaining payroll taxes, i.e., disability and unemployment taxes are due each quarter, by the 30th of the first month of the new quarter. Local taxes, i.e., those pertaining to Jersey City and Newark, are also settled on a quarterly basis and due by the last day of the first month of the next quarter (so, for example, by April 30th for Q1).

If an employer settles payroll taxes after their due date, they might be subject to hefty penalties between 5% and 25% of the balance due, along with interest. 

How to submit payroll taxes in New Jersey

In New Jersey, all businesses must process their payments electronically, via Electronic Fund Transfers (EFTs). They can choose from Automated Clearing House (ACH) debit or ACH credit, credit card, or an electronic check (e-check). 

ACH debit/ACH credit

To settle payroll taxes using ACH debit or credit:

• First, enroll with the Division of Revenue
• If you use ACH debit, the state can initiate an electronic withdrawal from your bank account. In this case, the state covers all processing costs.
• If you use ACH credit, you ask the bank to transfer your liability to the state’s bank account. In this case, you cover any fees for the transfer.

Electronic Check (e-check)

To use an e-check:

• Visit the Division of Taxation website
• Provide your New Jersey taxpayer identification number along with either your 4-digit Personal Identification Number (PIN) or the initial four characters of your taxpayer name under which you are registered
• You’ll also need your 9-digit bank routing number and your account number

Any taxpayer who has a bank account is allowed to settle taxes via an e-check without making any special arrangements with the bank. 

Credit card

Companies can settle their annual, quarterly, and monthly payroll tax obligations online via approved credit cards—American Express, Discover, or Visa. The transaction fee is added to the tax payment and covered by the taxpayer.

Rippling’s full-service payroll software

Are you searching for a way to quickly settle all your taxes? Rippling’s payroll software is so advanced it practically runs itself. Beyond automating compliance tasks, it ensures timely and accurate submission of your federal, New Jersey state, and local payroll taxes to the right authorities.

FAQs about New Jersey payroll taxes

Are there local tax laws in New Jersey?

Yes. Some municipalities within the state implement local employer payroll taxes. 

Can your tax returns be audited in New Jersey?

Yes. The Division of Taxation conducts tax audits. A tax audit's statute of limitations spans four years. Exceeding this time frame requires written consent from the taxpayer. 

Are nonprofit organizations subject to payroll taxes in New Jersey?

Yes, nonprofit organizations are obligated to withhold state payroll taxes. Depending on the size of their payroll, federal and state taxes must be settled monthly or quarterly. They also have to file an annual report and submit it to the Revenue Division of the New Jersey Department of Treasury. 

Note that charitable organizations are exempt from local payroll taxes in both Newark and Jersey City.

What is a NJ-W4 form?

NJ-W4 is a form that must be filled out by all employees, including new hires, to declare their filing status and permit their employer to withhold wages for taxes.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for, tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.