Updated: May 23, 2022
Out of all the states in the US, New Jersey has the highest population density, highest percent urban population, and the densest system of railroads and highways. In the world, New Jersey has the most diners, the most shopping malls in one area, the largest seaport, the longest boardwalk, and the tallest water tower. So for a little guy, New Jersey has a lot going on. The same goes for New Jersey payroll taxes. All the local taxes, withholding requirements, and insurance taxes can get beyond confusing. Fortunately, our New Jersey payroll calculator can simplify the process so you can focus on making your small business the next big thing New Jersey has to offer.
All we need from you is your employees’ wage and W-4 information, and our calculator will do the rest. It will calculate gross pay, net pay, and any deductions for New Jersey and Federal taxes.
Federal Payroll Taxes
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 $147,000 for the year. Any wages earned above $147,000 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 very informative IRS video 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 0.5% to 5.8% on the first $39,800 for 2022. 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.
And…You’re Good to Go!
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.
You can also make deposits on an ongoing basis through the EFTPS payment system.
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