Updated: May 6, 2024
All of New Jersey’s local taxes, withholding requirements, and insurance taxes can be confusing. Fortunately, our New Jersey payroll calculator can simplify the process so you can focus on your small business and employees.
Federal payroll taxes New Jersey employers should know
Before you can start thinking about New Jersey payroll taxes, you need to first calculate federal payroll taxes. Below is a summary of the steps you need to take in order to run federal payroll, but if you would like to get into the nitty-gritty, check out our step-by-step guide.
- Gross Wages. There are two main types of wages: hourly and salary. Calculate hourly employees’ wages by multiplying the number of hours worked by their pay rate, including a higher rate for any overtime hours worked. Calculate salaried employees’ paychecks by dividing their salary by the number of pay periods per year. Bonuses, tips, and commissions also get included in gross wages.
- Pre-Tax Deductions. For all employees with a 401(k), FSA account, or anything along those lines that are exempt from payroll tax, subtract any contributions they make from gross wages before you apply any payroll taxes.
- Federal Income Tax. This is the biggest chunk of payroll taxes. It ranges from 0% to 37%, depending on your employees’ income level. If you need more clarification, you can always turn to the IRS for more information.
- FICA Taxes. FICA stands for the Federal Insurance Contribution Act, and it is responsible for collecting both Social Security and Medicare taxes. For Social Security, withhold 6.2% of each employee’s taxable wages until they have earned $168,600 for the year. Any wages earned above $168,600 are exempt. For Medicare, withhold 1.45% until taxable wages reach $200,000. This rate gets bumped up to 2.35% for salaries above $200,000. The official term for the extra 0.9% tax is called Additional Medicare Tax (very original, we know…). You as the employer are responsible for matching all FICA taxes that your employees pay. The only exception is the Additional Medicare Tax for salaries above $200,000, which is paid only by employees.
- FUTA Tax. Your employees can sit this one out because only employers are responsible for this one. The Federal Unemployment Tax Act (or better known as FUTA) tax, is applied to the first $7,000 in wages you pay to each employee during the year. The rate is a flat 6%. If you’re good and you pay your New Jersey unemployment tax in full and on time, you could be rewarded a tax credit of up to 5.4%. Check out this information from the IRS on how FUTA tax credits work.
- Post-Tax Withholdings. If your employees are subject to court-ordered wage garnishments, for example, you are responsible for taking the money out of their paychecks at this stage and sending that money to the proper authorities.
New Jersey state payroll taxes
New Jersey has a progressive income tax policy with rates that go all the way up to 10.75% for gross income over $5 million. Tax brackets vary based on filing status and income.
Local Taxes: For most of the Garden State, there are no local income taxes. However, Newark residents and any non-residents who work in Newark have to pay an additional city tax of 1%.
Unemployment Insurance (UI): In New Jersey, unemployment taxes are a team effort. Both employers and employees contribute. Rates range from 0.6% to 6.4% on the first $42,300 for 2024. If you’re a new employer, you’ll pay a flat rate of 2.8%.
Disability Insurance (DI): New employers pay 0.5%. Employees pay 0.47%. All other businesses are taxed based on employment experience.
Family Leave Insurance (FLI): New Jersey is a family-oriented state, granting insurance if you are bonding with a new baby (biological or adopted) or caring for a sick family member. Employees are responsible for paying this 0.28% tax.
NJ Workforce Development Partnership Fund: 0.0425% for employees and 0.1175% for new employers.
Here are all the details if you want to look further.
Keep in mind: There are some states with reciprocal tax agreements in place, and New Jersey currently has one with the neighboring state of Pennsylvania. What does this mean? Let’s say that you have an employee who lives in Pennsylvania, but travels to New Jersey to work for your company. In this situation, your employee may want state taxes withheld for their home state instead of where your business is located. To set this up, the employee must fill out Form NJ 165 and give it to you.
Keeping compliant
New Jersey is one the states where having a workers’ comp is necessary for most employers. Learn how policies work, how this type of coverage safeguards employees from workplace injuries and illnesses, and can protect companies from litigation in our guide to New Jersey workers’ compensation insurance.
New Jersey payroll tax resources
In case that wasn’t enough, here are some more resources for you to learn more about New Jersey payroll taxes:
Register as an employer with the Department of the Treasury | (609) 292-9292
Employer Withholding Information from the Division of Taxation.
New Jersey Income Tax Withholding Instructions | (609) 984-1721
For existing employers (as well as those looking to launch a business), New Jersey provides a special tax information packet to help them understand their tax obligations and avoid missteps. If you want to learn more, here are two options:
- Call their tax hotline at 609-292-6400
- Use New Jersey’s Automated Tax Information System at 800-323-4400
Did you know?
The Garden State is working on a mandatory retirement savings program that is scheduled to go into effect in 2024. Learn more in our employer’s guide to New Jersey Secure Choice.
Write those paychecks
Go be the next big, or small, thing. If anything, New Jersey has proven that sometimes the smallest things make the biggest impact. So go write those paychecks and make the impact your small business, whatever it is, was meant to make. Make sure to send in your federal tax filings every quarter by filling out Form 941. You also need to file Form 940 to report your FUTA taxes annually. Learn more about IRS tax due dates here. You can also make deposits on an ongoing basis through the EFTPS payment system.
Do you have employees nearby too? These might be helpful.
More helpful payroll calculators
The calculator at the top of this page makes it simple for New Jersey employers to quickly process their employees’ gross pay, net pay, and deductions (so you can cut paychecks with confidence). But occasionally, employers have situations that require a little more number crunching. For example, if you reward employees with bonuses, Uncle Sam considers them supplemental wages and requires taxes to be withheld. Moreover, if an employee leaves for another job, you may need to figure out what their final paycheck will be. So, if you can use a little more help adding up the numbers, check out some of the calculators listed below.