Christie Rescinds Order to End PA-NJ Tax Reciprocity Agreement

Christie Rescinds Order to End PA-NJ Tax Reciprocity Agreement

On November 22, 2016, New Jersey Governor Chris Christie decided to rescind his September 2, 2016 executive order to end the tax reciprocal agreement with Pennsylvania. Christie announced that he is now able to save the income tax reciprocity agreement with Pennsylvania due signed bipartisan legislation to streamline and modify the State’s pharmacy benefits system.

Posted on November 17, 2016

Employers, Be Prepared! End of the PA & NJ Tax Reciprocity Agreement

side-img-reciprocal-agreementIn September 2016, the Governor of New Jersey ended a 40-year-old reciprocal tax agreement with Pennsylvania effective January 1, 2017. Pennsylvania residents working in New Jersey will become subject to New Jersey income tax.

Similarly, New Jersey residents working in Pennsylvania will become subject to Pennsylvania income tax. This change will impact employers and individual taxpayers as of January 1, 2017. Here is what you need to do:

(For more information on the reciprocal agreement change visit our Knowledge Center)

New Jersey Employers of Pennsylvania Residents

  • Withhold New Jersey income tax for any employee working in New Jersey (including Pennsylvania residents in which only Pennsylvania income tax was being withheld for previous to January 1, 2017).
  • No longer accept New Jersey Form NJ-165, Employee’s Certificate of Nonresidents in New Jersey from Pennsylvania resident employees.
  • Provide all employees that work in New Jersey with Form NJ-W4 no matter their state of residence.
  • Employees may ask that you voluntarily withhold Pennsylvania income tax from their wages in addition to their New Jersey withholding so they may not need to make estimated quarterly tax payments to Pennsylvania starting in 2017.
  • To begin withholding Pennsylvania income tax you will need to register for a Pennsylvania employer withholding tax account.
  • If you will no longer need to withhold Pennsylvania income taxes for your employees, you must cancel your Pennsylvania employer withholding account effective December 31, 2016.

Pennsylvania Employers of New Jersey Residents

  • Withhold Pennsylvania income tax for any employee working in Pennsylvania (including New Jersey residents in which only New Jersey income tax was being withheld for previous to January 1, 2017).
  • No longer accept Pennsylvania REV-419, Employee’s Non-Withholding Application Certificate from New Jersey resident employees.
  • You are not required to register with New Jersey as an employer. However, your employees may ask that you voluntarily withhold New Jersey income tax from their wages in addition to their Pennsylvania withholding so they may not need to make estimated quarterly tax payments to New Jersey starting in 2017.

The Pennsylvania Department of Revenue has a flier that is available to employers to print and post to inform employees of this important tax change here.

If you have any questions, please contact a member of Withum’s Tax Services Group at [email protected].

 

To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

Previous Post

Next Post