What is the biggest fluke in nj?

I live and work in MN for a co. regd. only in NJ. Do I still have to file NJ tax return?

• I live and work in MN as an employee of a company registered only in NJ. My company had deducted (withhold) tax for state of MN (without having registration) during whole year, and that is reflected in each of my 2008 pay stubs. Though they had not deducted any amount of income tax for NJ through-out the year, the W2 given to me showed NJ Income tax, and not for MN. According to my company, as they are not registered with MN, they have paid my withhold tax to NJ, and I have to file state tax return for NJ as a non-resident to get refund, and also file another state tax return and pay income tax for MN as a resident. I never worked or lived in NJ. I am just an employee of the company registered in NJ. Do I still need to file tax return for NJ ? If my company is not registered in MN, they are still allowed to withhold state tax for MN ?

• Answer:

  You live and work in MN. MN can tax your wages and NJ can not. The location of your employer is irrelevant. They should NOT have withheld NJ income taxes from your pay. If your pay stubs showed MN taxes withheld, your W-2 MUST reflect the same tax withholdings for MN. Your employer MUST correct the W-2. They will probably be facing some penalties from MN for not properly reporting the income and taxes withheld, but if they withheld the tax from your pay according to your pay stubs (be SURE that is says "MN state" income tax, not just "state" income tax) then they are required to reflect the same fact on your W-2 and file any necessary MN payroll tax returns and deposit your MN state tax withholdings from your pay with the State. If your pay stubs just show "state" income tax withholdings without identifying the state then it's possible that the withholdings were paid to NJ. Even so, the pay stub SHOULD reflect the state that the withholdings applied to. You would have to file a non-resident NJ tax return showing $0 income and the NJ taxes withheld. NJ would then refund the taxes to you. (Attach an explanatory note to your NJ return so that they understand what's going on.) Then you file your regular MN state return and pay any tax due. MN may assess penalties and interest for late payment but you MIGHT be able to get those abated IF you can prove to MN that you reasonably though that MN taxes were being withheld as reflected on your pay stubs. Going forward, your employer might not be required to withhold MN state income taxes from your wages if they have no presence in MN. However MN may treat your status as their employee as a presence in MN and require that they withhold MN taxes and make MN wage reportings to MN for unemployment compensation eligibility and other reasons. If MN does not require tax withholdings from them, you will have to start making quarterly estimated tax payments to MN to avoid any penalties and interest from under-withholding in the future.