The New Jersey Division of Taxation has issued an important reminder to residents working remotely for out-of-state employers: you may qualify for a refundable Gross Income Tax credit if you successfully challenge income taxation tied to convenience rules in another state. This unique credit applies to tax years 2020 through 2023 and aims to address situations where remote work income earned in New Jersey is taxed by another state.
Key Eligibility Requirements
To qualify for the credit, taxpayers must meet the following criteria:
- Residency: You must be a New Jersey resident.
- Out-of-State Taxes: You must have paid income or wage tax to another state.
- Refund Denial: You must have been denied a refund for income earned while working remotely in New Jersey.
- Legal Appeal: You must have filed an appeal against the other state’s tax assessment in that state’s tax court or tribunal.
- Favorable Final Judgment: You must have obtained a final judgment in your favor under the other state’s legal framework.
- Refund Issued: You must have received a refund of the disputed taxes from the other state.
A Promising Precedent
The Division highlights a recent success story: a New Jersey taxpayer challenged New York’s taxation of income earned remotely from home. After prevailing in court, the taxpayer received a refund of over $7,000 from New Jersey based on this credit.
Finality of Judgments
It’s crucial to note that the judgment from the out-of-state tax court or tribunal must be final under the laws of the taxing state. This ensures that the case is fully resolved and no further appeals are possible.
If you believe you qualify for this credit, the New Jersey Division of Taxation encourages you to review your tax filings and consider consulting a tax professional. Documenting your case thoroughly and pursuing the appeal process in the out-of-state tax jurisdiction is critical to achieving a favorable outcome.
Why This Matters
With the rise of remote work, convenience rules have become a contentious issue for taxpayers and states alike. By offering this credit, New Jersey is advocating for its residents’ right to fair taxation and encouraging them to stand up against potentially improper assessments by other states.
For more information, please contact Martin D. Hauptman at (973) 243-7912 or via email at mhauptman@mblawfirm.com